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1 

2 

3 

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6 

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>**»«»«•*.  WB^i&^l 


THE  SELF-PROVING 

Accounting  System 

INCLUDING    ILLUSTRATIONS 
OF    VARIOUS    BOOKS    AND    FORMS    IN    FACSIMILE 

WITH   SPECIAL  APPLICATION  MADE  TO   THE 

INSTALMENT   BUSINESS 

A    MANUAL    FOR    BUSINESS    MEN.    ACCOUNTANTS   AND 

AUDITORS 


..^"' 


.<^ 


-BY- 


"°.c^r.-  ^o^»«.~- -:r.Tr  - 

f  AND 

J-   F.   BROWN,  MERCHANT,  OP  J.  F,   BROWN  *  CO.,  CREDIT  HOUSE- 

FURNISHERS 


^ 


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-A 


Nkw  York  and  Toronto 
P».USH.„  BV  XH.  SE^^oVmo  .CCOU.T-BOOK  COMP^.v 

1897 


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COPYRIGHT    1897 

BY    I     F     BROWN    AND    A.    O.    KITTREDGE 

ALL    RIGHTS  RESERVED 


I 


i 


PREFACE 

Different  features  of  the  system  of  account  keeping,  which 
it  is  the  object  of  this  book  to  explain,  have  been  used  by  the 
authors  in  various  connections  for  periods  ranging  from  three  to 
twenty  years  each.  In  the  preparation  of  the  work  these  frag- 
ments have  been  collected,  rearranged  and  perfected,  and  finally 
supplemented  by  the  parts  found  necessary  to  constitute  a  com- 
plete working  system. 

There  is  nothing  of  mere  theory  about  the  methods  pre- 
sented. Every  detail  has  been  subjected  to  the  severe  test  of 
actual  trial.  The  system  in  complete  form  is  already  in  use  in 
leading  business  houses,  to  which  inquirers  can  be  referred  for 
assurances  of  its  practical  utility. 

The  Private  Ledger  and  Perpetual  Balance^heet,  in  the  form 
presented  in  the  pages  following,  is  one  of  the  newest  features  of 
the  system,  but  since  it  was  devised  it  has  been  given  such  exten- 
sive use  in  various  Hues  of  business  that  its  general  usefulness  has 
been  fully  demonstrated. 

The  plan  in  mind  when  the  preparation  of  thii,  volume  was 
commenced  was  to  restrict  it  to  a  scheme  of  Self-Proving  Ac- 
counting for  the  Instalment  Business.  The  idea  of  extending 
the  description  and  illustrations  to  include  a  complete  working 
system  of  accounts,  adaptable  to  any  line  of  business,  did  not  find 
favor  with  the  authors  until  after  a  considerable  portion  of  the 
work  had  been  put  in  type  and  the  illustrations  completed.  The 
reader,  therefore,  will  find  in  various  pages  references  to  instal- 


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^  TUK    SKM'-rROVlNG 

ment  methods  and  requirements,  which  otherwise  might  have 
been  omitted,  or  at  least  accompanied  by  additional  examples 
drawn  from  other  branches  of  business. 

It  would  be  very  difficult  to  expound  any  method  of  ac- 
counting intelligently  and  satisfactorily  without  introducing  il- 
lustrations taken  from  some  branch  of  business  or  other.     The 
authors  believe,  therefore,  that  their  employment  of  the  instal- 
ment business  for  this  purpose,  particularly  in  view  of  its  peculiar 
intricacies  and  complications,  in  the  matters  of  analysis  and  ac- 
counting provisions,  will  not  render  the  volume  less  satisfactory 
to  the  general  reader.     On  the  other  hand,  the  applications  of 
methods  made  to  the  instalment  business  give  the  book  a  special 
utiUty  in  an-  important  division  of  trade,  which  in  the  past  has 
been  almost  entirely  neglected  by  accountants,  but  which,  meas- 
ured by  its  annual  sales,  is  so  large  as  to  be  entitled  to  the  most 

careful  attention. 

This  work  is  divided  into  four  parts.     First  there  is  pre- 
sented an  outline  of  the  Self-Proving  Accounting  System,  with  a 
careful  discussion  of  the  principles  of  analysis  and  classification 
upon  which  it  is  based.     Second  in  order  there  are  descriptions 
of  the  several  leading  books  which  it  has  been  found  convenient 
to  employ  in  arranging  and  conducting  accounts  upon  the  plan 
outHned.     Several  of  these  are  presented  in  miniature  fac-simile, 
with  illustrative  entries.    Third  there  is  a  section  entitled  "The 
Instalment  Business,"  in  which  are  presented  those  chapters 
which  relate  more  specifically  to  the  accounting  and  office  rou- 
tine of  retail  credit  sales.    And  fourth,  and  finally,  there  are  pre- 
sented some  words  of  general  advice  to  instalment  merchants 
based  on  much  of  the  experience  which  has  resulted  in  this  book. 

This  volume  is  believed  to  contain  a  more  thorough  inquiry 
into  the  bookkeeping  wants  of  a  particular  line  of  trade,  with  an- 
swers to  all  the  leading  questions  which  arise,  than  has  heretofore 


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ACCOUNTIXO    SYSTEM  8 

been  issued  in  the  interest  of  any  branch  of  business;  and  yet  tlie 
authors  are  sensible  of  shortcomings  in  various  particulars.  No 
doubt  future  editions  will  afford  the  opportunity  for  such  addi- 
tions and  amendments  as  will  bring  the  work  still  nearer  to  their 
ideal.  To  this  end  they  are  eager  to  correspond  with  every  pur- 
chaser and  user  of  the  volume — first,  to  make  good  any  deficiencies 
that  the  reader  may  discover,  by  answering  direct  those  questions 
which  ho,  may  desire  to  propose;  and,  second,  to  secure  sugges- 
tions for  additional  chapters  in  future  editions. 

The  object  of  the  book  is  to  be  serviceable  in  the  best  and 
broadest  sense  of  the  term,  and  this  will  be  secured  in  no  small 
part  of  the  supplementary  work  to  be  done  through  correspond- 
ence and  by  personal  interviews. 


J.  F.  BROWN, 

3-5-7  Queen  St.,  East, 
ToRuNio,  Ont. 


A.  O.  KITTREDGE, 

257   Edgecombe  Ave., 
New  York.         * 


TABLE     OF    CONTENTS. 

PART     I. 

THE  SELF-PROVING  ACCOUNTLNG  SYSTEM. 

43  Illustrations. 

INTRODUCTION 

What  the  Self-ProvlUK  AeoountitiK  System  Ih— A  Double  Entry  System- 
More  Than  u  Double  Entry  System— A  System  Adapted  to  Modern  Re- 
quirements—Features  of  I'roof— Post  Inn  from  Original  Entries— No  Copy- 
ing—Combined Records  and  LedKers— Utilization  of  Unskilled  Help— Work 
Sectlonallzed. 

CLASSIFICATION     OF     ACCOUNTS 

Two  Principal  Divisions- Proprietor's  Accounts— Accounts  of  the  Trans- 
actions—Capital Account  and  Results  of  Trawiactlons— Expenses  of  Doing 
Business— Losses  and  Gains— Disposal  of  Profits  and  Losses— Dlvktendu 
and  Divisions— Impairment  and  Surplus— Capital  Account  and  Expense  Ac- 
counts—Expense Ledgers  or  Expenses  Collectively— Buying  and  Selling- 
Credits  and  Payments— Resource  Accounts— Liability  Accounts— Prop- 
erty—Money—Debtors—Notes  Receivable— Creditors— Notes  Payable— Prop- 
erty Accounts— Merchandise  Account— Buying  Account— Selling  Account- 
Manufacturing  Account— The  Fuactloos  of  the  Manufacturing  Account, 
Buying  Account  and  Selling  Account— Department  Merchandise  Accounts— • 
Real  Eistate  Investment— Real  Estate  Results— Bonds  Investment— Bonds 
Results— Store  Fixtures— Manufacturing  Plant— Cash  Account— Bank  Ac- 
count—Debtors' Accounts— Creditors'  Accounts— I'roprletor's  or  Partners' 
Drawing  Account— A  Stockholder's  Account— The  Account  of  a  Clerk  or 
Emploj-e— Purchase  Ledger  Account— Sundry  Creditors'  liOdKor  Account- 
Sundry  Debtors'  Ledger  Account— Inetalment  liCdger  Account  -A  Typical 
Balance  Sheet— Investment  Accouuts  or  Items  of  Fixed  Capital— Quick  As- 
sets—Available Resources— Depreciation  Accounts— Reserve  Accounts— Re- 
serve for  Rebates  and  Allowances— Reserve  for  Bad  Debts— Reserve  for 
Plant  Depreciation. 

SUBDIVISION    OF    THE    LEDGER 

Separate  Ledger  Volumes— Subdivisions  of  a  Single  Volume— Rulings 
Adapted  to  Special  Requirements— Ledger  Machines— Ledger  for  Sales  Ac- 
counts—Ledger for  Purchase  Accounts— Balance  Column  Ledger— Ledger 
for  Expense  Accounts— Combined  Expense  Record  and  Ledger— Diagram  of 
Ledger  Divisions. 


I 


8 


THE    SELF-PROVING 


MERCHANDISE    ACCOUNT 

Necessnry  Subdivisions— Mnnufacturiug  Account— Buying  Account— Selling 
Account— Cost  Prices  and  Selling  Prices— Goods  Returned- Functions  of 
the  Several  Divisions  of  tlie  Merclmndise  Account. 

MANUFACTURING 

Manufacturing  as  a  Subdivision  of  a  Merchandising  Business— Conduit  of 
a  Small  Manufacturing  Department— Accounts  of  a  Manufacturing  De- 
partment, with  Goods  Sold  at  Retail— Accounts  of  a  Manufacturing  Depart- 
ment, with  Goods  Sold  at  Both  Retail  and  Wholesale— Costs  of  Manufactur- 
ing—Manufacturing Account  Should  not  Carry  Stock— Buying  Account 
Should  Cari-y  Inventory— The  Balance  in  Manufacturing  Account— Material 
Account— General  Expenses— Cost  Accounts— Product  Accounts— Spreading' 
the  Charge  of  Generiil  Expenses— Determining  the  Percentage— Basis  of 
Distribution— Materials  vs.  Labor— Clwing  Labor  Account— Closing  Ma- 
terial Accounts— Closing  General  Expense  Account— Depreciation  of  Plant- 
Wear  of  Machinery  a  Part  of  the  Cost  of  Product— Subdivisions  of  Buying 
Account  and  Selling  Account- Retail  Sales— Wholesale  Sales— Retail  Cus- 
tomers-Trade Customers. 

CAPITAL  ACCOUNT  VERSUS  PROPRIETOR'S  ACCOUNT 

Necessity  of  Strict  Classification- Capital  a  Fixed  Quantity— Proprietor's 
Private  Account— Proprietor's  or  Partners'  Salary— Credits  for  Profits— The 
Proprietor  a  Debtor  to  the  Business -The  Proprietor  a  Creditor  of  the  Busi- 
ness—Partnership Agreements— Partners'  Accounts— Best  Method  of  Avoids 
Ing  Disputes  in  Partnership  Settlements. 


PART    II. 

SELF-PROVING    ACCOUNT-BOOKS. 

86  Illustrations. 

CONSTRUCTION    OF    THE    BOOKS 

Use  of  Wide  and  Narrow  Leaves— Reinforcement  or  Thickening  of  the  Pro- 
jecting Portions  of  the  Wide  Leaves— Fifty  Lines  to  the  Page— Numbering' 
of  the  Lines— Numbering  of  the  Pages— Combination  Readings  of  Page 
Numbers  and  Line  Numbers-Reference  Index  of  the  Mercantile  Ledger 
and  Instalment  Ledger— Patented  Features— Trade-mark-Oopyrlghts— 
Self-Proving  Accounting  System  Is  Not  a  Seci-et  System— No  Fee  De- 
manded for  Instruction— Features  PubMsihed  to  the  World— Reasonable 
Prices  for  Supplies— Competition  Discouraged- Piracy  Made  Unprofit- 
able—Special  Books  to  Order. 

PRIVATE    LEDGER    AND    PERPETUAL    BALANCE    SHEET 

Construction  of  the  Book— Arrangement  of  the  Accounts-Relationship  of 


V 


ACCOUNTING    SYSTEM 


)unt— Selling 
runctlons  of 


-Condui  t  of 
icturing  De- 
iring  Depart-* 
Manufactur- 
ing Account! 
int— Material 
s— Spreading' 
ge— Basis  of 
■Closing  Ma- 
on  of  Plant— 
Qs  of  Buying 
-Retail  Cus- 

JT 

-Proprietor's 

Profits— The 

:  of  the  Busl-t 

lod  of  Avoidi 


ig  of  the  Pro- 
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ings  of  Page 
Euitile  Ledger 
-Copyrights— 
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EET 
elationship  of 


the  Prlviite  Leilger  to  tlie  Ot.lier  Books  of  the  System— Opening  tlie  Private 
liedger— Conducting  the  Accounts— Daily  Reports— Cross  Entries  for  De- 
termining Results— Balance  Sheet  with  AVhIch  to  Open  a  Sanii»le  Private 
Ledger— A  Typical  Periodical  Report— Tlie  Report  Entered— T8(M'  or  Cost 
of  Goods— Cross  Entry  Between  Buying  and  Selling— Cross  Entry  Between 
Selling  and  Loss  and  Gain— Expenses  of  Doing  Business— Allowances  for 
Depreclalion  of  I'laut  and  Fixtures— Provision  for  Rel)ates  and  Allow- 
ances—Provision for  Bad  l)el)ts— Cross  Entry  Between  lioss  and  Gain  and 
Expenses  of  Doing  Business— Net  Profits  Shown— Cross  Entry  Between 
Loss  and  Gain  and  Dividends  and  Divisions— Credits  to  Partners'  Ac- 
counts—Dividends Paid— TransferreiK'e  to  Impalrmemt  and  Surplus  Ac- 
count—Footing tlie  Closed  Accounts- Balances  Struck  In  Oik'u  Accounts- 
Balance  Sheet  After  the  Cross  Entries  Have  Been  Made— Making  Cross 
Entries  at  Frequent  Intervals— Proving  the  Private  Ledger— Special  Ad- 
vantages of  the  I'rivate  Ledger— Incidental  Advantages  of  the  Private 
liedgei-^Sectlonalizing  the  Bookkeeper's  Work— The  Terrors  of  a  Trial 
Balance  Removed— A  Trial  Balance  in  Easy  Stages— Concealment  of  Er- 
rors Impossible— Location  of  Errors  an  Easy  Matter. 

SELF-PROVING     MERCANTILE     LEDGER 

Construction  of  the  Book— Monthly  Accounts— Divisions  of  Monthly 
Spaces— Line  Nund)ers— Page  Numbers— Combination  Readings— Reference 
Index— The  Instant  Location  of  Required  Accounts— Allotment  of  Spaces 
to  Accounts— Opening  tiic  Ledger— Monthly  Postings— Balances  Caiu:ied 
Forward— Checking  Paid  Bills- Monthly  Statements— Self-Proving  Feat- 
ures—Locating Errors— Sectionalizing  Work— Proving  Page  by  Page— Bal- 
ancing with  the  Account  in  Private  Ledger— The  Usual  Form  of  Trial  Bal- 
ance Unnecessarj'- Monthly  Summary  or  Recapitulation  Sheet— Utility  of 
an  Adding  Machine— An  Analysis  of  tlie  Credit  Postings— Checking  with 
Sales  Book— Checking  with  Cash  Book— Checking  with  Bill  Books— Man- 
agement of  Credit  Balances— The  History  of  a  Customer's  Transactions- 
Relationship  to  tlie  Private  Ledger  and  Perpetual  Balance  Sheet. 

INSTAIiMENT     LEDGER 

Construction  of  the  Book— Line  Account  in  Principle— Entering  the  Names- 
One  Line  to  an  Account— Divisions  of  Monthly  Periods— Debit  Items- 
Credit  Items— Provisions  for  Weekly  Payments— Summary  of  Cash  Pay- 
ments—Analysis of  Sundry  Credits— Methods  of  Proving— Sectionalizing  by 
Pages— Footings  Carried  Forward  or  Summarized  in  a  Special  Book— Iiln«» 
Numbers  Page  Numbens— Combination  Readings— Reference  Index— 
lastamt  Turning  to  Any  Re<iulred  Account— Opening  the  I^edger— Conduct 
of  the  Ledger— Going  Accounts  Illustrated— Management  of  Special  AlloW'* 
ances— Closing  the  Accounts— Carrying  Forward  to  a  New  Ledger— Special 
Methods  of  Proving— Checking  with  Sales  Book— Checking  with  Cash 
Book— Management  of  Interest  Charges— Writing  Off  Bad  Debts. 

CARRYING    FORWARD    LEDGER    BALANCES 

Construction  of  the  Transfer  Slip— Ruling  and  Numbering  of  the  Slip— 


111 


I 


F 


n 


s 


10 


THE    SELF-r  ROVING 


Hanping  Lip— Mothod  of  AppljiUK— How  Balances  Are  En tei-ed— Second 
Position  of  the  Transfer  Sllii— The  Page  Turned— Balances  Written  in  the 
Xew  Account— Method  of  Identifying  Transfer  Slips— Proving  tlie  Balance 
r<xrtinga— Totaling  with  an  Adding  AhHrhlne. 
NUMBER    RECORD 

Serial  Numbers  for  Original  Documents— Numbers  for  Sales  or  Order 
Slioots— Number  Record  In  Loose  Sheet  Form  or  Bound— System  of  Num-  , 
berlng— Sets  of  Sheets  or  Pages— Combination  Readings  of  Page  Number 
and  Line  Number— The  Use  of  Several  Series  of  Number— Economy  of 
Lalior— No  Accumulated  Useless  Sto<-k— Numbering  Machines  Superseded— 
Routine  of  I'se  of  Number  Record— A  Sales  Number  Never  to  he  Duplicated. 
SALES    RECORD 

A  Register  of  Sales  Sheets— Notation  of  Date— Record  of  Order  Numbers- 
Sales  AmountB— L'istributing  Column*— Provision  for  Tsoc  or  Record  of 
Cost  of  Goods  Sold— Cliecking  witli  Number  Record— Auditor's  Check— 
What  the  Sales  Record  Shows— Management  of  Cash  Sales— Posting  frour 
the  Sales  Record— Goods  Returned  by  Customers. 
PURCHASE    RECORD 

Register  of  Invoices— Goods   Sent  Back— Net   Purchases-Ruling  of  the 
Purchase  Record— Distributing  Columns— ^lanagement  of  Goods  Shipped 
Back— Reference  Coluuuis— Invoice  Number  CJolunin- Posting  the  Purchase 
Record— Relationship  to  Buying  Account  and  Manufacturing  Account. 
CASH    JOURNAL 

Features  of  the  Book— Constructijin— Cross  Entries— Summary  of  AuxU- 
laries- liine  Numbers  to  be  Read  with  Page  Numbers— Bookkeeper's  Dally 
Report— Posting  to  the  Private  liCdger. 
CASH     BOOKS 

Cash  Receipts— Cash  Disbursements— Petty  Cash— Balancing  Petty  Cash- 
Distributing  Columns— Posting  to  the  Cash  Journal— Proving  the  Casb 
Books. 
BALANCE    COLUMN    LEDGER 

Style  of  Ruling— Ac<M>uuts  to  l>e  Opened  In  It— Printed  Heads— Manage- 
ment of  Accounts— Ruling  Off  Complete  Accounts- Inserting  Heads  with  u 
Rubber  Stamp. 
NOTE    RECORDS    OR    BILL    BOOKS 

Construction— Books  of  Original  Entry— Combined  Ledgers  and  Posting 
Mediums— Relationship  to  the  Private  I^edger- Method  of  Conducting  the 
Books— Entering  a  Note— Distributing  Columns  for  Contra  Accounts— 
Where  Payable— Record  of  Collateral  and  Endorsements— Monthly  Ac- 
counte  of  Paper  Falling  Due-Paper  Falling  Due  Beyond  ihe  Current  Year- 
Management  of  Notes  Payable  on  Demand— Interest  Payments-Proving 
the  Note  Records— Monthly  Proofs— Method  of  Numbering  Notes. 
SUSPENDED    LIST 

Construction  of  the  Book-Opeiilng  the  List— Yearly  Accounts-Proof  by 
Comparing  with  Loss  and  Gain  Account— Management  of  Credits— Carry* 


'ill  Tf  Ti  'ii  -i  I  If 


tKl— Second 
Itteu  lu  the 
he  Balance 


8  or  Order 
ni  of  Num- 
ge  Number 
Dcononiy  of 
uperseded— 
Duplicated. 

Numbers— 
•  Record  of 
r's  Cheek— 
osting  from 


liuf:  of  the 
Tds  Shipped 
he  Purchase 
ccount. 

y  of  Auxll- 
eper's  Daily 


:»etty  Cash— 
ig  the  Casb 


ds— Manage- 
[eads  with  ai 


and  Posting 
nducting  the 
Accounts- 
Monthly  Ac- 
irrent  Year— 
nts— Proving 
ites. 

its- Proof  by 
edits— Carry' 


ACCOUNTING    SYSTEM 


11 


iug  Balances  Forward— Doubtful  Accounts  as  Carefully  Supervised  as  lAve 
Accounts— Name  and  Residence  of  Attorney— Record  of  Correspondence- 
Record  of  Judgements— Combined  Reading  of  Line  Numbers  and  Page 
Numbers. 

EXPENSE     RECORD     AND     LEDGER 

A  Combination  Record  and  Ledger— Construction  of  the  Book— Rulings- 
Distributing  Columns  for  Accounts  in  Private  Ledger— Individual  Expeuso 
Accounts. 

INDEXING 

Selection  of  a  Name  Index— Using  Account  Numbers  Instead  of  Page  Num- 
bers—Perpetuity of  Numbers  from  Year  to  Year— liOcation  of  New  Ac- 
counts. 


PART    III. 
THE    INSTALMEN'i     BUSINESS. 
33  Illustrations.    ' 

GROWTH    OF    TH^    INSTALMENT    BUSINESS 

Rapid  Development  in  the  Recent  Past— Supplies  a  Want— Basis  of  Secur- 
ity—A Legitimate  Business  System— Profitableness  of  the  Instalment  Busi- 
ness-Ease of  Management— Advantages  of  the  Instalment  Business— A 
Constant  Income— Bookkeeping  System  and  Business  Administration. 

BENEFICENCE    OF    RETAIL    CREDITS 

A  Want  Supplied— Instalment  Purchases  and  Life  Insurance— A  Home  Fur- 
nished on  the  Instalment  Plan— A  House  Bought  Through  Building  Asso- 
ciations—Habits of  Saving  Fostered— Former  Abuses  of  the  System— Charac- 
teristics of  the  Modern  Instalment  Dealer. 

THE  SELF-PROVING  ACCOUNTING  SYSTEM  APPLIED  TO  THE   IN- 
STALMENT  BUSINESS. 

Features  Described— Sales  Department— Delivery  Department— Bookkeep- 
ing or  Office  Department— Collections— Adaptability  of  the  Self-Pi-oviug 
System. 

HOW     TO     INSTALL     A     NEW    OFFICE     SYSTEM 

Advantage  of  Expert  HeliJ— The  Business  Engineer— Adaptations  to  Spe- 
eial  Requirements- Making  the  Cliange  Without  Interruption  to  the  Busi- 
ness 

DATE    FOR    MAKING    CHANGES 

An  Inventoi-y  of  Goods  on  Hand  the  Only  Coudltionr— Adaptations  of  the 
Books— Special  Printings. 

SMALL  AND  LARGE  STORES 

The  Self-Proving  System  Adapted  to  Business  Enterprises  of  All  Sizes— 


THE    SELF-rROVIXG 


Adnptetl  to  All  Conditions  of  Buainoss— Capable  of  Expansion  as  the  Busi- 
ness Develops— Helps  the  Bookkeeper  lu  His  Work. 

ArrLICATlON     FOU     CKEDIT 

Necessary  Particulars— Advantages  of  a  Blank— A  Form  Suggested— The 
Bookkeeper's  Report— The  Salesman's  Report— Recommendation  of  tha 
Business  OfBce— Manager's  O.  K.-rreserviug  Credit  Applications. 

SALES  SHEETS  OR  ORDER  FORMS   > 

Same  as  Are  Largely  Tsed  by  "VVliolesale  Establishments— Duplication  bj^ 
Carbon  Process- Several  Copies  fi-om  a  Single  Writing— Customers'  In- 
voices—Reciuisitions  on  Sliipping  Department— The  Ottice  Copy— Maintain- 
ing Order  Numbers— Varialions  in  Printing— The  Lease  or  Agreement  on 
the  Back  of  the  Order  Slieet— Purchaser's  Signature— Form  for  Cash  of 
Open  Account  Sales— Salesman's  Prelindnary  List— Writing  Out  tlie  Order 
or  Invoice— SiUesman's  Initials— Recording  Tsoc  or  Cost  Prices  of  the 
Goods  Sent  Out. 

LEASES,     SALES    CONTRACTS    AND     CHATTEL     MORTGAGES 

The  Security  of  a  l^ien  or  Mortgage— Limitations  of  Open  Account  Sales- 
Terms  of  Conditional  Sales— Form  of  Contract- Competent  Counsel  Always 
Sliould  Advlst^— De<-i«ious  of  the  Courts  To  Be  Wiitched— ModlUcatlons  of 
State  lii  \vs— A  Borrowing  Form— A  Contract  Form— Another  Contract 
Form— A  Cliattel  Mortgage  Form. 

DELIVERY    OF    GOODS 

Requisition  on  the  Shipping  Department— Directions  to  the  Truckman  or 
Cartei'^Receipt  To  Be  Signetl  by  the  Purchaser  or  His  Representative- 
Duplicating  by  Carbon  Process— Requiring  the  Truckman  or  Carter  to 
Countersign  the  Receipt— Checking  the  Receipt  with  the  Office  Copy  of  In- 
voice—Serial Number  of  Shipping  Tickets  or  Receipts— Checking  the  De- 
livery Department— Security  Against  Fraud— No  Dellverj-  Without  a  Sales 
Number. 

CUSTOMERS'     PAY     CARDS 

Form  of  Card— Ruling  and  Printing  of  Pay  Card— Charges  and  Credits- 
Dates  of  Payments— Signature  of  Collector— Code  for  Reporting  Results  of 
Collectors'  Calls— Making  Out  the  Pay  Cards-Ofllce  Copy  and  Customer's 
Copy— Notation  of  Salei  Numbers— Convenient  Method  of  Turning  to  a 
Customer's  Ledger  Account— Periodical  Examination  of  Pay  Cards— Pay 
Cards  the  Basis  of  Correspondence  with  Customers— Pay  Cards  and  State- 
ments of  Accounts —Orlg'.nals  of  Pay  Cards  To  Be  in  Ink. 

COLLECTION     BOOKS 

An  Alternative  Plan— RuUng  of  the  Books-Management  of  the  Books- 
Collectors'  Duties. 

KEEPING     CUSTOMERS'    PAY     CARDS 

Necessity  of  Systematic  Filing-Alphabetical  Arrangement  by  Names- 
Time  Arrangement  by  Dates  of  Payment— Inspecting  the  Cards  Weekly- 
Sorting  for  Routes— Pigeon-hole  Cases— Cases  Adapted  to  Use  In  Safes— Ac- 
eordeon  Flies- Customers'  Cards  In  Vaults— Cases  In  Open  Office. 


ACCOIXTING    SYSTEM 


18 


the  Busl- 


sted— The 
n   of   the 


Iratlon  bj5 
)iiiers'  lu- 
-Malntaln- 
femeut  on 
r  Cash  of 
the  Order 
•es  of  the 

GES 

lut  Sales— 
iel  Always 
ications  of 
■   Contract 


iickman  or 
sentative— 
Carter  to 
3opy  of  In- 
ig  the  De- 
)ut  a  Sales 


1  Credits- 
Results  of 
Customer's 
rnlng  to  a 
Dards— Pay 
and  State- 


lie  Books- 


y  Names— 
9  Weekly- 
Safes— Ac- 
e. 


POSTING    THE    INSTALMENT    LEDGER 

Numerous  Transactions— Small  Items  of  Charge— Still  Smaller  Items  of 
Payment— The  Resulting  Clericnl  Work— System  Iteduccs  Labor— Ability 
to  Use  t'nskiUed  Labor— Routine  of  Posting— Details  on  Pay  Cards— Lump 
Entries  In  Cash  Book— Pay  Cards  as  Posting  Mediums— Instalment  Ledgei* 
Posted  by  a  Team  of  Two— Checking  the  Work  with  the  Comptometer- 
Rapidity— Accuracy— Kive  Times  the  Speed  of  f)rdinary  Work— Ledger 
Constantly  Up  to  Date— Sorting  the  Cards— Posting  by  a  Single  Clerk- 
Proof  by  Use  of  Comptometer. 

COLLECTION     DEPARTMENT 

Need  of  Organization— Should  Be  Effectively  Administered— Managed  by 
the  Proprietor— Routine  in  a  Large  Establishment- Necessary  Office  Work— 
Books  Must  Be  Up  to  Date— Perlotlical  Supervision  of  Accounts— Route 
Lists  for  Collectors— Payments  at  the  Office— Correspondence  with  Cus- 
tomers—Collectors' Calls— Promptness  in  Demanding  what  Is  Due— Friend- 
liness Should  Never  Descend  to  Carelessness  in  Administration— Visiting 
Customers  Regularly— Qualifications  of  Collectors— Courtesy  a  Prime 
Requisite— Duties  of  Manager  of  Collection  Department— Prompt  Action  ori 
Collectors'  Reports— Checking  Pay  Cards  with  Ledger— Keeping  Pay  Cardd 
lu  Order— Assistance  of  Ledger  Keepers— Specific  Directions  to  Collectors— 
Keeping  the  Work  Well  In  Hand. 

A    COLLECTOR'S    ROUTINE 

Pay  Cards  Sorted  with  Respect  to  Routes— Pay  Cards  Arranged  with  Re- 
spect to  Dates— Collector's  Daily  Report— Use  of  a  Code— Collector's  Report 
of  Cash  Received— Pay  Cards  as  Posting  Mediums— Payments  to  Collector^ 
and  Payments  at  the  Office— Prompt  Calls— Adjusting  Dates  and  Hours  to 
Correspond  with  Route— Contributing  to  the  Change  of  Address  Book. 

CANCELLED    SALES 

For  Goods  Returned  by  Customers  Reverse  the  Entries  Made  When  Tliey 
Were  Sent  Out— Reverse  Entry  to  be  Made  In  Selling  and  Buying  Accounts. 

MERCHANDISE    RETURNED 

Taking  Goods  Back— Credits  to  the  Customer's  Account— Charge  to  Selling 
Account— Cross  Entry  Between  Selling  and  Buying  Account— Getting  the 
Goods  Back  into  Buying  Account  at  Cost  Prices— Forms  Convenient  for 
Use. 

PRESERVING     ORIGINAL     PAPERS 

Sales  Sheets  or  Orders  In  Duplicate— Delivery  Sheets  or  Shipper's  Ticket* 
in  Duplicate— An  Adequate  Assortment  of  Blanks— Method  of  Holding 
Blanks  and  Carbon  Sheets— A  Locked  Post  Binder— A  Transfer  Binder— 
A  Post  Binder  Filled  and  Opened  Near  the  Middle— Sheets  In  Post  Binders 
Better  Than  Ordinary  Bound  Books— Temporary  Files  for  Invoices. 

COMPLAINT    AND    INFORMATION    BOOK 

Utility  of  the  Book— How  Kept— What  It  Contains— Record  of  Complaint 
Satisfied— Utility  of  the  Book  in  the  Management  of  the  Business— Reasons 


m 


I 


14  THE    SEI.F-rROVIXG 

for  Deferred  Paj-nients— Record  of  Promises  to  Pny  at  Future  Dates- 
General  Office  Blotter. 

CHANGE    OF     ADDRESS    BOOK 

Form  of  Ruling— How  Conducted— Who  Contribute  the  Information— Mak- 
ing Entries— Posting  to  Pay  Cards  and  to  Name  Index— Fixing  Responslbll- 
it^.—Credlt  to  Whom  Credit  Is  Due— Where  Book  Is  Kept— Accessible 
to  Both  Office  and  Outside  Force— Must  Be  Kept  Up  to  Date. 

STREET    DIRECTORY    OF    CUSTOMERS 

Record  of  Houses  and  Buildings  In  Which  Are  Goods  Out  on  Lease— Inter- 
course with  Second-Hnnd  Dealeiiw-tMoney  Lenders— Exchanges  of  Cour- 
tesies—Plans of  the  Dlrectoi-y- Use  of  Mflips  and  Tags— Book  with  Lists 
of  Street  Numbera— MeWiods  of  Subdivision— Card  Index  Plan. 

REPAIRING     AND     JOBBING 

Accommodating  Customera— Cost  Items— Charges— Management  of  the 
Accounts— ReiMilrIng  and  Jobbing  Recoi-d— Relationship  to  Selling  Ac- 
count—Damages to  Goods  in  Ti-auslt- Ohange®  to  Buying  Account- Main- 
taining Records  of  Cost— Making  Pivper  Charges. 

SEWING  AND   LAYING   CARPET 

Recoi-dlug  Costs— Crediting  Selling  Account— Debiting  Buying  Account- 
Labor  and  Materials— A  Ticket  Systeuir-How  Employed— Advantages. 

(.)LD    LEASE    ACCOUNTS 

Changing  fi-om  the  Old  Plan  to  the  New— Consolidating  the  Accounts- 
Single  Pay  Cards— Ada pthig  the  Plan  to  Clwumstances. 

AUDITING   THE    BOOKS 

Bueiness  Men  Should  Regularly  Examine  Their  Books— Daily  Audits 
Save  Money- Piwision  for  Recording  the  Progi-ess  of  the  Audit- Audit- 
or's Check— Auditing  by  Professional  Accountants— Carelessness  Usually 
P:-ecedes  Dlohouesty— Ohecklnig  Carelessness— Holding  Office  Employee 
to  their  Lines  of  Duty. 

MANAGING    THE    BANK    ACCOUNT 

Le<lger  Account  with  t<he  Bank— Keeping  t)he  Bank  Account  on  the  Stubs 
of  the  Check  Book— A.  Check  and  Deposit  Register— Statement  of  Trans- 
actions with  tlie  Bonk -The  Bank  Account  In  t»he  Private  Ledger— Cash 
Accounit  the  Inclualve  Account- Deposit  Tickets— Carbon  Duplicates- 
Maintaining  a  Number  of  Bank  Accounts. 

BUYING    GOODS    AND    RECORDING    COSTS 

Getting  Goods  Into  the  Store  Ready  for  SelEng— Cost  Records— Cost 
Marks— Ordering  Goods— Recoi-ds  of  Oixiers- Chocking  the  Prices— 
Stamiping  the  Invoice®— Filing  the  Invoices— Maintaining  a  Cost  Book- 
Marking  Prices— RelationBlilp  of  Bujrlng  Account  to  Selling  Account- 
Basis  of  Cost  Calculations— Tagging  the  Goods. 

RENT,   TELEPHONE,   TAXES,   &C. 

Monthly  Bills— Quarterly  Bllls-^Payments  at  the  End  of  the  Term-Pay- 
ments In  Advance-Conducting  the  Accounts— Expense  Should  be  Charged 


•!"-n!s 


ACCf  )l\\TI  X(S    SYSTKM 


V> 


e  Dates— 


tion~Mak- 
esponslbil- 
Accessible 


ase— Inter- 
s  of  Cour- 
wlth  Lists 


nt  of  the 
lelling  Ac- 
uut— Maiu- 


Accouut— 
autages. 

Accounts— 


lly   Aiicllts 

dlt-Audlt- 

>ss  Usually 

Employee 


1  the  Stubs 
t  of  Trans- 
dger— Cash 
)uplicates— 


cords— Cost 
e  Prices— 
}ost  Book— 
:  Account— 


Term— Pay- 
be  Charged 


up  Monthly  Irrespective  of  tlie  Tinw^s  of  Payment— Accounts  to  Iw  Offset 
by  Expense  Clwirges— Payment*  Made  in  Advanre  of  Service  Are  Repre- 
»ente<l  l>y  Resource  Accounts— Accumulating  Accounts  tr  l)e  Discharged 
by  Puture  Payments  Are  lilabllltlee— Proper  Cla«slflcatlca  of  Accounts. 

AVOIDIXr,   CONFUSION    OF    SALES    NUMBERS 

The  Mischief  of  Diiplicaite  Numbers— Metho<l«  of  Avoiding  Duplications- 
Checking  the  Numlxer  Record— A  Bill  Register— The  Office  Numliering 
Machine— Sales  Numbers  on  Order  Sheets— Nunil)er  Record  In  the  Auto- 
graphic Register. 

PART   IV. 
SUGGESTIONS    TO    INSTALMENT    MERCHANTS. 

CHARACTER  OF   THE   ADVICE 

Not  Officious— Based  Upon  I^ng  E2.\i)erlence— Restrlcte<l  to  Leading  Fea- 
tures. 

ATTENTION    TO    CUSTOMERS'    WANTS 

Small  People  Have  Small  Wants— Keeping  Customei^  Pleased— Making 
Influential  I<Ylends  Out  of  Pleased  Customei-s— The  Virtue  of  Patience- 
Discreet  Action  In  View  of  All  tlie  Facts. 

AVOIDING  NUMEROUS  LEASES  OR  CONTRACTS  WITH  THE 
SAME  CUSTOMER 
Objections  to  Several  Contraicts  with  one  Pei'son  in  Progress  at  the  Same 
Time— Keeping  the  Sales  Sheet  Oi)eu— The  Account  In  the  Instalment 
ledger  Sliould  Correspond  vristh  the  Contract— Provieion  for  Recording 
Several  Sales. 

PARTIAL  DELIVERIES 

Due  to  Delay  In  Receipt  of  Goods— Lack  of  Moajsurements— Carrying  the 
Transaction  on  the  Order  Sheet— Checking  the  Order  Sheet  When  All  Is 
Completed— Management  of  Goods  Sold  for  Future  Delivery. 

MODIFICATION    OF    CONTRACTS 

No  Changes  to  be  Made  Above  Signatures^Make  Out  a  New  Lease— How- 
to  A^'old  Disputes  at  Settlement— Cancelling  an  Order  and  Starting  Anew 
Where  a  Change  hi  Understanding  Occurs. 

CHANGING    THE    FORM    OF    A    CUSTOMER'S    ACCOUNT 

Transferring  the  Balance  from  One  Ledger  to  Another— Objections  to 
This  Plan— Re\'er8lng  the  Emtries  and  tlien  Starting  Anew— The  Ledger 
Account  Should  Correspond  with  the  Terms  of  the  Contract— Establish 
tlie  CoiTect  Rule  at  the  Outset  and  Cai'efully  Adhere  to  It. 

GUARDING  AGAINST   DUPLICATE  RECEIPTS 

Oireiimstanoes  Under  Which  Special  Receipts  Will  Be  Demanded— Care- 
lessness of  Clerks  and  Collectors— How  Dlslionest  Customers  May  Manage 


Mt'i^m wiiiiwf 


I 


16 


TiJE  SELF  rnovixo 


— Heforo  Giving  the  Swoiul  Uwi'lpl  8«;iire  the  Return  of  the  Flwt— Re- 
phic'lnj,'  Ltwt  Tav  Cunla. 
CARK  AHOIT  RECEIPTING}   "IX   FULL  OF  ALL  DEMANDS" 

Collectors  nncl  Office  Cnshiers  Soiuetlnies  Taken  Off  Their  Guard— Iie>*.Keif 
Account  Should  Ke  Exaniluetl  Before  Giving  the  Receipt— Utility  of  ('ross 
Referi'n<'es. 

LOANS  TO   CUSTOMERS 

Rea**<)U«  for  Advancing  Money  to  Iimtalinont  Custoniens— Method  of  Con- 
diictiii);  the  Account— G>iK'ninj,'  a  SiHH"laI  Account  for  Gash  Items— Terms 
of  I'iiynieut— Kei»i)lnK'  the  Cash  Ai»art  from  Che  Instalment  Account— 
I'roper  Cross  References. 

CARTAtJE    AND    STORAGE 

Demands  for  CaitaKc  and  Storage— Advantage  of  Such  Transaetlous- Rec- 
ords of  Service  Performed— Management  of  Charge*— Cash  Payments— 
Cuetomers'  Stonige  Memorandums. 

RECOVERING   GOODS 

Voluntarj'  Surrender— Opix^ltlon  by  the  Customer— Avoiding  the  Em- 
ployment of  Force— Replevin. 

GOING    TO    LAW    WITH    DEBTORS 

Consider  the  Cost— Ascertain  lu  Advance  the  Debtor's  Ability  to  Pay- 
Appearances  Frequently  Deceitful— Net  Results  Vei-y  Often  a  Ixtss  to  the 
Business. 

INTEREST    ON    OVERDUE   ACCOUNTS 

Management  of  Interest  Charges- Credits  for  Interest- Interest  Record- 
Management  of  Reductions  Allowed  In  Settlement— Use  of  Columns  In 
Cash  Journal. 

VOUCHERS    FOR    CASH    DISBURSEMENT'S 

Desirability  of  Vouciliers— Filing  Vouchers— Fixing  the  Responsibility— 
Form  of  Vouchens— Advantage  of  Printed  List  of  Accounts  on  Vouchens. 

DATING  STAMPS 

A  Real  Economy— Advantages  of  Ttoeir  Employment— Dating  Papers 
Generally— Automatic  Time  Stamps. 

BAD   BUYING 

Indiscreet  Orders— Mistake®  of  Judgment— Getting  Rid  of  Bad  Stock— Ad- 
vantages Which  the  Instalment  Merchant  Has  Over  Others. 

EXAMINATION    OF    RECORDS    OF    CHATTEL    MORTGAGES 

Necessity  of  Keeping  Posted— Methods  of  Obtaining  Information— Report- 
ing Agencies. 

DETECTIVE    WORK 

Necessity  of  Some  Detective  Work— Some  People  Are  Kept  Honest  by 
Fear  of  Being  Found  Out— Collectors  Are  Sometimes  Good  Detectives— 
Trackere  of  Funilture— Trick*,  of  Buyers  on  the  Instalment  Plan— Auction 
Sales— Removing  Without  Notice— Professional  Crooks— Goods  Abandoned. 

WRITING    OFF    BAD    DEBTS 

Doubtful  Accounts  Should  Be  Carefully  Weeded  Out— Use  of  tlie  Sus- 
pended List— Means  of  Watching  Doubtful  Accounts. 


l:''-^t)FWITIfTmpaHffi;-iJBa.tiMft^ 


■  the  Flr»tr-Re- 

AXDS" 

Guard— Le>'.Keif 
L'tllltj'  of  Cross 


Mt^thod  of  Con- 
li  Items— Terms 
nent  Aceouut— 


iiisuc'tloufi — Rec- 
\ah  Pnyiuents— 


>idiDg  the  Em- 


Lbllity  to  Pay— 
iu  a  IjOss  to  the 


iterest  Record— 
of  Columns  In 


PART    I 


THE    SELF-PROVING 

ACCOUNTING   SYSTEM 


Responsibility- 
rts  on  Vouchers. 

-Dating   Papers 


Bad  Stock— Ad- 
's. 

GAGES 
■matlon— Report- 


Sept  Honest  by 
K)d  Detectives— 
it  Plan— Auction 
>ods  Abandoned, 


Use  of  the  Sub- 


oWkMltiMeii 


riri*iii'iiTl.ari 


«riu* 


INTRODUCTION 

Two  leading  considerations  are  to  be  kept  in  mind  when 
examining  accounting  appliances  and  methods.  One  is  the  rela- 
tionship of  each  individual  element  to  the  system  as  a  whole,  and 
the  other  the  convenience  and  efficiency  of  the  device  in  itself  for 
the  special  purpose  for  which  it  is  intended.  The  first  of  these  is 
determined  by  the  system  itself,  or  the  principles  upon  which  the 
system  is  based,  and  the  second  by  the  features  of  the  devices  and 
their  adaptability  to  the  ends  in  view.  The  Self-Proving  Ac- 
counting System,  so  far  as  underlying  principles  are  concerned,  is 
based  upon  an  adequate  and  logical  analysis  and  classification  of 
the  accounts,  producing  as  the  result  an  ever-ready  balance  sheet 
of  the  business.  So  far  as  the  individual  elements  are  concerned 
each  in  itself  is  labor  saving  as  well  as  efficient,  and  also  what  is 
believed  to  be  better  for  the  purpose  for  which  it  is  intended  than 
anything  else  that  has  ever  been  offered  to  the  public. 

The  Self-Proving  Accounting  System  is  a  double  entry  sys- 
tem and  may  be  characterized  as  double  entry  brought  down  to 
date  and  adapted  to  modern  requirements.  It  is  more  than  dou- 
ble entry,  for  in  addition  to  each  transaction  being  represented 
in  two  accounts,  one  showing  the  debit  and  the  other  the  credit, 
each  account  is  twice  entered,  once  as  an  individual  element  and 
once  as  a  part  of  a  group,  or  one  of  a  number  of  elements  taken 
collectively. 

The  balance  sheet  which  is  embodied  in  the  Self-Proving 
Private  Ledger  is  the  sum  and  essence  of  the  entire  system.     It 


mmam 


wms 


I 


1^ 


»i 


n 


•20 


THE    SELF-rilOVING 


may  be  described  as  the  centre  of  the  system,  around  which  the 
other  elements  are  arranged.  The  Self-Provinjj  Accovmting  Sys- 
tem, l)y  way  of  ilhistration  and  explanation,  might  be  declared  to 
consist  of  one  principal  book,  the  Private  Ledger  and  Balance 
Sheet,  which  is  a  ledger  complete  within  itself,  and  likewise  a 
posting  medium  so  far  as  cross  entries  between  its  several  ac- 
counts are  concerned.  All  the  other  books  are  mere  auxiliaries  to 
it,  for  the  history  which  they  contain  in  detail  is  shown  in  the 
Private  Ledger  in  a  condensed  form. 

The  system  is  self-proving  in  that  it  affords  a  means  of  veri- 
fication of  each  and  every  part,  as  well  as  of  all  the  parts  taken 
collectively.  The  Private  Ledger  and  Balance  Sheet,  as  we  shall 
see  as  we  go  along,  is  so  arranged  as  to  be  in  balance  at  all  times, 
and  therefore  any  error  in  it  is  instantly  detected  by  a  comparison 
of  the  debit  footings  with  the  credit  footings.  Each  of  the  other 
ledgers  in  the  system,  which,  it  should  be  remarked,  may  be  more 
or  less  in  number,  according  to  the  nature  of  the  business,  will 
not  be  in  balance  by  itself,  but  will  balance  with  the  corresponding 
account  in  the  Private  Ledger  and  Balance  Sheet.  Therefore 
each  may  be  proved  by  itself,  independent  of  the  others.  Each 
of  the  line  account  ledgers,  for  example  the  Mercantile  Ledger 
or  the  Instalment  Ledger,  as  illustrated  in  this  volume,  affords 
within  itself  a  means  of  proof,  page  by  page  and  month  by  month, 
thus  localizing  any  errors  by  which  the  total  balance  is  dis- 
turbed.. In  addition,  each  of  these  ledgers  may  be  compared  by 
both  debit  and  credit  footings  with  the  debit  and  credit  footings 
of  the  posting  mediums  from  which  its  amounts  have  been  de- 
rived. 

The  fact  that  the  Private  Ledger  and  Balance  Sheet  is  in 
balance  is  proof  on  its  face  of  the  correctness  of  all  the  auxiliary 
books.  As  long  as  it  is  in  balance  errors  need  not  be  looked  for; 
but  whenever  it  is  apparent,  in  any  direction,  that  an  error  exists, 


I  I 


t'li-irtifir  ',;a. 


.  .t.  iffW  r-mm  'i ;  -t"'  -iW  tSitf i  ig  iilt<B 


(I  which  the 
Hinting  Sys- 
:  declared  to 
\n(\  Balance 
d  likewise  a 
I  several  ac- 
luxiliaries  to 
tiown  in  the 

cans  of  veri- 
parts  taken 
,  as  we  shall 
at  all  times, 
I  comparison 
of  the  other 
nay  be  more 
)usiness,  will 
)rresponding 
.  Therefore 
thers.  Each 
ntile  Ledger 
time,  affords 
th  by  month, 
lance  is  dis- 
compared  by 
edit  footings 
ave  been  de- 

i  Sheet  is  in 
the  auxiliary 
e  looked  for; 
I  error  exists, 


AOC(»I'NTINO    8Y8TEM  B 

the  different  suborditiate  liooks  may  be  examined,  one  by  one,  and 
proven  by  proper  comparison,  one  with  tlie  other,  without  the 
labor  of  going  over  the  eiltire  work  as  a  single  unit.  Hy  this  plan 
the  bookkeeper's  work  is  sectiorjalized,  and  thp  necessity  of  an  im- 
mense amount  of  labor  which,  in  books  as  usually  arranged,  is 
expended  in  checking  back  all  the  entries  whenever  an  error  has 
been  shown  to  exist,  is  avoided. 

The  Self-Proving  Accounting  System  is  comprised  in  books  of 
original  entries,  some  of  which  serve  the  double  purpose  of  a  ledger 
account  for  the  class  of  transactions  to  which  it  is  devoted  and  a 
posting  medium  for  the  contra  entries  to  some  other  books  of  the 
system,  thus  maintaining  the  double  entry  principle  throughout. 

There  is  no  copying  or  writing  the  record  of  any  transaction 
the  second  time.  Each  transaction  is  recorded  with  others  of  its 
class  in  the  book  specially  set  apart  for  the  purpose,  whik  opposite 
entries,  either  singly  or  by  footings  of  columns,  are  carried  to  the 
other  books,  the  whole  history  finally  reaching  the  Private  Ledger 
and  Balance  Sheet  in  the  most  condensed  form.  The  one  book  in 
the  system  that  is  in  balance  at  all  times  is  the  Private  Ledger, 
which  summarizes  within  very  small  compass  the  entire  business. 
The  other  books  of  the  system,  while  not  in  balance  in  themselves, 
prove  by  balancing  one  with  the  other  and  by  comparison  with  the 
balances  in  the  accounts  or  columns  in  the  Private  Ledger. 

Some  of  the  books  employed  in  the  Self-Proving  Accounting 
System  are  special  to  it,  and  others  are  mere  adaptations  of  fea- 
tures and  principles  heretofore  in  use.  Some  of  the  books,  as  be- 
fore mentioned,  are  combined  records  and  ledgers,  receiving,  on 
the  one  hand,  the  original  entry  of  a  transaction,  and  on  the  other 
recording  it  ledger  fashion.  Each  of  the  books  is  independent  of 
all  the  others  as  an  article  of  use,  and  each,  therefore,  is  entitled 
to  consideration  on  its  merits,  independent  of  the  system  as  a 
whole.     Thus  the  Private  Ledger  is  adapted  for  use  with  any 


}fr~^ 


TUE    SELF-rROVING 


n 


adequately  kept  set  of  double  entry  books.  The  Notes  Payable 
and  Notes  Receivable  Records  and  Ledgers  described  in  this  vol- 
ume are  likewise  adapted  for  use  in  connection  with  other  sys- 
tems, and  the  same  is  true  of  the  Expense  Record  and  Ledger 
and  of  the  Investment  Record  and  Ledger. 

The  utility  of  the  plan  upon  which  the  Self-Proving  Account- 
ing System  is  based  is  apparent.  Each  of  the  records  is  so  con- 
structed that  any  clerk,  even  though  not  skilled  in  the  art  of  book- 
keeping, can  make  his  entries  correctly  therein.  As  many  clt-ks 
may  be  employed  in  thus  recording  the  dififerent  classes  of  transac- 
tions as  the  size  of  the  business  may  demand.  The  work  of  one  or 
twenty  may  be  utilized.  These  dififerent  clerks,  however  numer- 
ous, in  no  respect  interfere  with  each  other.  Each  record  book  is 
essentially  independent  of  all  others,  and  therefore  each  clerk's 
work  is  peculiar  to  himself.  The  correctness  of  each  record  book 
can  be  proved  at  any  time  by  comparison  with  the  proper  account 
or  column  in  some  other  book  of  the  system,  or  in  the  Private 
Ledger.  The  cross-posting  from  one  book  to  another  is  of  the 
simplest  character  and  of  the  smallest  possible  amount  and 
may  be  done  daily  or  weekly,  as  preferred,  while  the  daily  summary 
or  Bookkeeper's  Report,  constituting  the  entries  in  the  Private 
Ledger,  is  a  matter  most  easily  arranged  by  the  general  book- 
keeper or  clerk  in  charge. 

The  distribution  of  the  general  accounts  of  the  business 
through  several  books  not  only  facilitates  the  daily  work  by  divid- 
ing it  between  a  number  of  people  according  to  the  magnitude  of 
the  business,  but  it  also  prevents  any  one  person  outside  of  the 
private  office  becoming  cognizant  of  the  confidential  facts  of  the 
business.  The  results  of  transactions,  the  actual  volume  of  the 
business,  the  profits  or  losses  made,  the  amount  of  goods  on 
hand — in  fact,  every  detail  of  a  private  character  is  retained  in  the 
private  office.    These     ems  could  scarcely  be  obtained  from  the 


1 


■'«"(* 


otes  Payable 

d  in  this  vol- 

:h  other  sys- 

and  Ledger 

ng  Account- 
ds  is  so  con- 
;  art  of  book- 
many  clt-ks 
es  of  transac- 
3rk  of  one  or 
^ever  numer- 
:cord  book  is 
each  clerk's 
record  book 
Dper  account 
the  Private 
her  is  of  the 
amount   and 
lily  summary 
the  Private 
eneral  book- 


ACCOIJiS'TING    SYSTEM 


23 


general  books  even  by  an  expert  with  ample  allowance  of  time  for 
examination  and  investigation,  because  the  Private  Ledger  opens 
with  the  balances  and  inventories,  and  they  do  not  appear  else- 
where. 

This  volume,  in  addition  to  a  general  exposition  of  the  Self- 
Proving  Accounting  System,  and  illustrations  of  the  books  and 
their  methods  of  use,  deals  more  particularly  with  the  Instalment 
Business,  and  shows  by  numerous  special  illustrations  how  the 
Self-Proving  Accounting  System  may  be  advantageously  em- 
ployed therein. 


the  business 
ork  by  divid- 
nagnitude  of 
itside  of  the 
I  facts  of  the 
)lume  of  the 
Df  goods  on 
tained  in  the 
led  from  the 


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m 


CLASSIFICATION    OF    ACCOUNTS       ' 

The  accounts  of  every  business  enterprise  at  the  outset  are 
comprised  in  two  grand  divisions.  The  first  of  these  incktdes  the 
accounts  with  the  proprietor  of  the  business,  whether  a  person, 
firm  or  corporation,  and  embraces  all  that  are  necessary  to  cor- 
rectly represent  the  capital  or  investment  and  the  results  or  prog- 
ress of  the  business.  The  second  includes  all  those  accounts 
which  show  the  transactions  of  the  business — in  other  words,  the 
operations  or  exchanges  of  value. 

We  shall  designate  the  first  class  the  Proprietor's  Accounts, 
whether  the  business  be  owned  by  a  single  person,  by  a  firm  com- 
posed of  several  persons  or  by  a  corporation.  The  principles  are 
the  same,  whatever  may.  be  the  details  in  these  particulars.  For 
purposes  of  this  analysis  we  shall  treat  the  capital  or  investment  in 
the  business  the  same  when  owned  by  one  man  or  a  private  firm  as 
when  owned  by  a  corporation,  because  in  this  respect  also  the 
underlying  principles  are  the  same.  While  it  is  possible  in  cases 
where  the  business  is  owned  by  a  single  individual — or,  for  ex- 
ample, by  a  firm  of  two  or  three  persons — to  conduct  the  books 
with  measurably  satisfactory  results,  without  the  extreme  analysis 
and  subdivisions  of  accounts  that  are  desirable  with  a  corporation, 
still  the  higher  form  of  accounting  more  correctly  represents 
actual  results,  and,  therefore,  we  shall  treat  the  individual  owner 
and  the  corporation  upon  exactly  the  same  plane. 

The  accounts  in  which  the  proprietor  of  a  business  is  specially 
concerned  also  divide  into  two  classes,  the  first  of  which  includes 


m 


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-'llf 


m  THE    SELF-PROVIXG 

the  Capital  Account  and  the  second  of  which  includes  all  the  ac- 
counts which  represent  the  Results  of  Transactio  is.  These  latter 
are,  on  the  one  hand,  the  accounts  representing  the  various  ex- 
penses of  doing  business,  and,  on  the  other  hand,  they  are  the 
Profit  and  Loss  Accounts.  Whenever  the  gains  from  the  trans- 
actions of  the  business  exceed  the  expenses  of  doing  business 
there  is,  of  course,  a  profit,  and  whenever  the  expenses  of  doing 
business  are  greater  than  the  gains  from  transactions  there  is,  of 
course,  a  loss. 

Right  here  let  us  make  the  point  that  the  Capital  or  Invest- 
ment in  a  business  is  always  to  be  considered  as  a  thing  in  itself, 
apart  from  that  which  is  represented  by  the  private  account  of 
the  proprietor  when  a  single  individual,  or  the  accounts  with  the 
different  members  of  the  firm  when  several  persons  have  com- 
bined their  resources.     Experience  among  business  men  demon- 
strates that  in  many  cases  the  two  accounts— namely,  one  repre- 
senting the  investment  and  the  other  representing  the  with- 
drawals and  deposits  of  the  owner  during  the  progress  of  the  busi- 
ness—are confounded  and  taken  to  be  one  and  the  same.     This  is 
wrong.     The  first  is  the  investment,  as  its  name  should  indicate, 
and  the  second  is  something  entirely  different,  and  the  two  should 
be  carefully  distinguished  from  each  other.     In  this  case,  as  in 
others  to  be  explained  as  we  go  along,  the  necessary  accounts  to 
be  opened  and  conducted  are  determined  not  alone  by  the  name 
of  the  individual  which  heads  the  account  as  a  title,  but  always  by 
the  nature  of  the  transactions  to  be  recorded  in  the  accounts. 
Thus  it  is  expedient  to  have  several  accounts  with  the  same  per- 
son whenever  that  person  stands  in  several  different  relationships 
to  the  business. 

The  capital  invested  in  a  business,  as  already  explained,  is  to 
be  treated  in  the  accounts  in  the  same  manner,  whether  supplied 
by  one  person  or  by  several  persons  constituting  a  firm,  or  by  a 


ACCOUNTING    SYSTEM 


m 


.11  the  ac- 
ese  latter 
rious  ex- 
\r  are  the 
he  trans- 
business 
of  doing 
ere  is,  of 

r  Invest- 
in  itself, 
count  of 
with  the 
ive  com- 
1  demon- 
ic repre- 
lie  with- 
the  busi- 
This  is 
indicate, 

0  should 
se,  as  in 
ounts  to 
he  name 

1  ways  by 
ccounts. 
ime  per- 
ionships 

ed,  is  to 
supplied 
or  bv  a 


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fCash 
Notes  Receivable  ( Instalment  or  Lease  Accounts 

Accounts  with  Debtors  ■< 

[Sundry  Debtors 

(Manufacturing 
Buying 
Selling 

r  Real  Estate 
Investments  -^  Stocks  and  Bonds 

[  Property  of  any  kind 

Notes  Payable 

(Purchase  Accounts 
Sundry  Creditors 
.  Reserves  for  Depreciation,  Contingencies,  etc. 


Expenses  oC 

Doing 

Business 


Losses  and 
Gains 


'  Withdrawals 


m 

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in 
in 

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in 

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a. 


Dr.^  Dividends 
>       and 
'  Net  Gains  =  Cr.  J  Divisions 


Net  Loss  = 


r  < 


Dr."!  Impairment 

V        and 
Cr.  J      Surplus 


^  Additions 

An  Analysis  of  the  Accounts  of  a  Merchandising  Business,  Forminq  the  Basis 
OF  a  Perpetual  Balance  Sheet. 


',"i@S8^BS»gSr 


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11 


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^  i 

i 

i 

28 


THE    SELF-PROVING 


considerable  number  of  persons  composing  a  stock  company;  and 
then,  in  turn,  separate  accounts  are  to  be  opened  with  the  indi- 
viduals, whether  partners,  stockholders  or  officers  of  the  corpora- 
tion, according  to  the  transactions  with  them,  whatever  their 
capacities.  These  personal  accounts  are  to  be  located  in  the 
books  of  the  business  in  the  classes  to  which  they  belong,  accord- 
ing to  the  nature  of  the  transactions  which  they  record.  Thus,  if 
the  individual  buys  goods,  the  account  recording  the  purchase 
goes  into  the  class  of  Sundry  Debtors.  If  he  lends  the  concern 
money  the  account  of  that  transaction  is  located  where  by  its 
character  it  belongs — namely,  among  Sundry 'Creditors.  In  an- 
other chapter  there  is  discussed  at  considerable  length  Capital 
Account  and  Proprietor's  Account,  and  therefore  we  need  give  no 
further  attention  to  this  matter  at  present,  but  with  this  much  by 
way  of  preliminary  may  proceed  with  a  description  of  the  general 
features  of  the  plan  of  classification. 

To  briefly  recapitulate  what  we  have  already  presented: — 
We  find  that  the  accounts  of  every  business  are  of  two  general 
classes.  On  the  one  hand,  as  shown  in  the  accompanying  dia- 
gram, there  is  the  account  of  the  proprietor,  whether  person,  firm 
or  corporation,  owning  the  enterprise  and  conducting  the  trans- 
actions, and  to  whom  the  business  is  accountable.  On  the  other 
hand,  there  are  the  accounts  of  the  commercial  acts  or  operations 
of  the  business,  or  the  exchanges  of  values — in  other  words,  the 
accounts  of  the  transactions  of  the  business.  It  is  essential  to 
the  proper  arrangement  of  the  accounts  in  the  form  of  a  balance 
sheet,  which,  as  a  fact,  is  one  of  the  principal  objects  to  be  kept  in 
view  in  all  bookkeeping,  that  these  two  elements  be  carefully  dis- 
tinguished and  kept  apart. 

Considering  now  the  proprietor,  we  find,  as  shown  in  the  dia- 
gram, that  so  far  as  the  records  of  the  business  are  concerned  there 
is  first  required  an  account  to  be  opened  with  Capital  or  Iiivest- 


II  I 


^Wunfit- 


ACCOUNTING    SYSTEM 


29 


mpany;  and 
th  the  indi- 
he  corpora- 
itever  their 
ated  in  the 
)ng,  accord- 
d.  Thus,  if 
lie  purchase 
the  concern 
fhert  by  its 
Drs.  In  an- 
gth  Capital 
leed  give  no 
his  much  by 
the  general 

)resehted: — 
two  general 
)anying  dia- 
person,  firm 
g  the  trans- 
)n  the  other 
r  operations 
r  words,  the 
essential  to 
of  a  balance 
;o  be  kept  in 
:arefully  dis- 

n  in  the  dia- 
cerned  there 
al  or  Invest- 


ment. This  account  shows  the  amount  which  the  owner  puts  into 
the  business  as  a  capital,  and  for  which  he  holds  the  business  re- 
sponsible for  safe  return  with  proper  gains.  The  capital  may  con- 
sist of  money,  property,  or  both,  as  the  case  may  be,  but  its  aggre- 
gate is  represented  by  the  credit  to  this  account.  At  the  outset, 
before  any  transactions  have  occurred,  the  elements  composing 
the  capital  are  very  easily  determined  and  specified,  but  after  the 
business  has  been  in  operation  for  a  time  various  changes  in  the 
disposition  of  the  capital  occur,  and,  therefore,  that  is  called  capi- 
tal when  a  balance  sheet  is  made  out,  which  represents  the  differ- 
ence between  the  resources  of  the  business  and  its  liabiHties. 

The  capital  of  a  business  may  be  increased  by  additional  in- 


Dr. 

Capital  Accouwt                                                              Cr. 

AmouDte  withdrawn 

Original  Investment 
AdditioDal  Inveiitmente 

1     Cr.  Balance-Net  Capital 

vestments  in  the  form  of  new  contributions,  or  the  gains  may  be 
allowed  to  remain  in  the  business,  thus  swelling  the  capital 
account.  The  capital  may  be  diminished  by  withdrawals  or  by 
losses  made  in  the  business.  In  the  conduct  of  the  Capital  Ac- 
count no  entries  should  be  made  to  it  except  those  which  repre- 
sent a  real  and  permanent  change.  If  additional  money  is  put  into 
the  business  to  remain  permanently,  then,  of  course,  Capital  Ac- 
count is  to  be  credited  therewith,  but  if  the  additional  money  is 
only  a  temporary  accommodation,  to  be  withdrawn  when  the  sea- 
son of  its  use  has  passed,  it  should  be  considered  as  a  loan  and  so 
treated  in  the  books,  the  record  in  that  case  being,  of  course,  en- 
tirely outside  of  the  Capital  Account.     Actual  withdrawals  of 


•if"* 


I      ; 


'.i: 


30 


THE    SELF-rUOVIXG 


capital  should  be  charged  to  Capital  Account,  but  the  small 
amounts  drawn  by  the  proprietor  or  partners  for  living  expenses 
should  not  be  considered  withdrawals  of  capital.  Instead  they 
should  be  treated  as  transactions  with  the  individuals  and  should 
be  charged  to  accounts,  the  offsetting  credits  to  which  come  out 
of  the  profits. 

An  increase  of  Capital  Account  by  reason  of  net  gains  follows 
upon  the  fact  of  profits  being  made  which  are  allowed  to  remain 
in  the  business,  but  no  such  entry  as  a  credit  to  Capital  of  net  gain 
should  be  made  unless  it  is  intenJed  that  the  amount  shall  actually 
remain  in  the  business.  If  the  gains  are  to  be  withdrawn  by  part- 
ners or  are  to  be  paid  as  dividends  to  stockholders,  then  Capital 
Account  should  not  be  disturbed  by  them. 

Capital  Account,  as  already  stated,  may  be  diminished  by 
losses  made  in  the  business.  If  these  losses  are  considerable  and 
are  permanent  in  character — that  is,  without  compensations  in  the 
way  of  future  advantages — then  Capital  should  he  diminished  by 
debiting  the  amount.  In  the  case  of  the  capital  of  a  stock  com- 
pany, however,  more  is  required  than  the  mere  judgment  of  the 
bookkeeper  to  warrant  any  entry  in  the  Capital  Account.  The 
necessary  legal  steps  to  a  reduction  of  capital  and  cancellation  of 
certificates  of  shares  must  precede. 

So  much  by  way  of  explanation  of  possible  entries  in  the  ac- 
count with  Capital.  As  we  proceed  with  the  discussion  of  the 
accounts  which  represent  the  resitlts  of  the  transactions  it  will  be 
seen  that  provision  is  made  in  other  accounts  for  taking  care  of 
the  profits  and  losses  of  the  business  without  interfering  with  the 
Capital  Account,  and  yet  in  a  way  to  always  represent  the  real 
amount  of  the  capital. 

Turning  now  to  the  second  division  of  the  Proprietor's  Ac- 
counts, as  shown  in  the  diagram,  it  will  be  seen  that  the  traHS- 
actions  of  a  business  produce  results  of  two  general  kinds  or 


SSIpaMWMiiHHMMi 


'aiift'>IOTItf|'i 


ITtfUliLll  »i  •'ii«'iiri«li»lW>H'<^*l*^l>«»*«*fc*W'i 


ACCOUXTIXO    8Y8TKM 


ai 


classes.  As  a  preliminary  to  the  transactions  there  are  the  neces- 
sary expenses  of  conducting  the  bu.  iness.  and  following  upon  the 
transactions  themselves  are  the  gains  or  losses  incident  thereto. 
All  those  accounts,  therefore,  which  represent  the  Expenses  of 
Doing  Business,  such  as  clerk  hire,  advertising,  rent,  light,  heat, 
insurance,  interest,  telephone,  telegraph,  stationery,  postage,  etc., 

I)r,  Ant  B.vpbnsb  Accoi-nt    (Indlvldtwl)  Ct. 


Experie  Piiid 
ExpviiB)'  Incurred 


CorNCtloni 


Dr.  Balance— Net  amoant  of 
thU  Expimae 


belong  in  the  grand  division  called  Results  of  Transactions.  All 
accounts  with  Losses  and  Gains,  whether  the  losses  or  gains  be 
presented  collectively  in  a  single  account  or  distributed  in  a  num- 
ber of  accounts,  as  is  sometimes  required  for  statistical  purposes, 
likewise  belong  in  this  division. 

In  practical  operation,  by  way  of  closing  the  accounts,  the 
aggregate  expense  of  doing  business  is  posted  to  the  debit  of  the 


Dr. 


BXPBN«E  I.BDHER  OB  ExPENiBS     (C;ollfCtlve) 


Cr. 


Total  debit  Item*  of  all 
the  Individual  Ezpenw) 
Accounts 


Dr.  Balance— Net  expen«eg  of 
doing  bui)in*M.  Cl'o  be 
carried  to  Loea  and  Gain 
Account) 


Total  credit  items  of  all 
the  Individual  Expense 
Accounts 


general  Loss  and  Gain  Account,  and  the  gross  profits  resulting 
from  the  transactions  are  posted  to  the  credit  of  the  same  account. 
The  result,  then,  is  the  net  profit  or  net  loss  from  the  business, 
which  brings  us  to  the  consideration  of  those  accounts  which 
record  the  disposal  of  profits  and  losses.     This  class  of  accounts 


4  :i 


T 


THE  sELF-rnovixo 


!,    i 


may  be  described  as  occupying  a  position,  in  a  sense,  midway  be- 
tween tiie  result  of  the  transaction  and  the  capital.  In  the  dia- 
gram they  are  shown  in  line  with  the  last  two  classes  described. 

The  two  accounts  that  are  required  for  correctly  representing 
the  disposal  of  profits  and  losses  are,  first.  Dividends  and  Divis- 
ions, and.  second.  Impairment  and  Surplus.      The  net  profits, 


Dr. 


Losd  Ann  Oaik 


Cr. 


Lnwca  from  had  (U-bU 
All  other  I.onfi 
Expeiiui  of  doing  bavloeM 


rroflU  on  Sales 
Income  from  Property 
All  other  Oalna 
All  Revenues 


Dr.  Balance— Net  Loss.  (To 
be  carried  to  Impairment 
and  Sarplns) 


Cr.  Balance— Net  Gain.  (To  be 
carried  to  Dividends  and 
Divisions) 


where  net  profits  have  been  made,  are  brought  by  cross  entry  from 
the  Loss  and  Gain  Account  to  the  credit  of  Dividends  and  Divis- 
ions. Then,  if  all  or  a  certain  portion  of  the  gains  are  to  be  car- 
ried to  the  credits  of  partners'  or  stockholders'  accounts  for  with- 
drawal, or  to  offset  withdrawals  already  made,  this  account  is 
debited  with  such  transfers.     The  balance  remaining,  if  any,  stands 

Dr.  Lobs  and  Gain  Ledobb   (Collective)  Cr. 


Total  of  the  debits  of  the  various 
sub-divisions  of  Loss  and 
Gain  Account 


Dr.  Balance— Net  Loss.  (To 
be  carried  to  Impairment 
and  Hurplus) 


Total  of  the  credits  of  the  varloai 
sub-divisions  of  Loss  and 
Gain  Account 


Cr.  Balance-Net  Gain.  (To 
he  carried  to  Dividends  and 
Divisions) 


for  profits  not  withdrawn  and  represents  what,  according  to  diflfer- 
ent  authorities,  is  called  Surplus  or  Reserve.  This  balance,  when- 
ever its  amount  has  been  determined,  is  transferred  to  the  credit  of 
the  account  called  Impairment  and  Surplus. 

In  case  the  results  of  the  business  for  a  given  period  as  shown 
by  Loss  and  Gain  Account  have  been  a  loss,  then  the  Loss  and 


ass. 


lidway  be- 
n  the  dia- 
scribed. 
presenting 
ind  Divis- 
et  profits, 

Cr. 


■  on  Salut 
le  from  Psopettj 
her  Malm 
gvenuea 


ACCOUXTIXG    SYSTEM  ■ 

Gain  Account  is  to  be  closed  by  debiting-  Impairment  and  Surplus 
Account  with  the  amount  of  that  loss.  From  this  it  will  be  seen 
that  Impairment  and  Surplus  Account  stands  with  relation  to  the 
Capital  Account  of  the  business  just  as  its  name  indicates.  It  is 
debited  from  time  to  time  with  losses  and  correspondingly  cred- 
ited with  the  profits  which  are  allowed  to  remain  in  the  Inisiness 

p^  Divinaum  aj">  Divihoki 


AmimiitH  csrrlwl  to  Proprlcturg 
or  I'lirtners'  iirlvato  nccuuDt 
or  paid  out  for  dlvideudi 


Cr. 

Amiiuiitn  brought  from  Lou* 
auU  UalD 


entry  from 
and  Divis- 
to  be  car- 
s  for  with- 
account  is 
my,  stands 

Or. 


Itsof  thevariooa 
of    Lou   and 
t 


g  to  diflfer- 
nce,  when- 
le  credit  of 

d  as  shown 
;  Loss  and 


Cr.  Bnlance— tTnilWMed  profltB. 

(To   tm  carrli'd   to   Iiiipalr- 
ment  and  Hiirplus  Account) 


either  as  an  offset  to  losses  already  entered  up  or  as  a  guarantee 
against  future  losses.  If  the  losses  for  a  given  period  exceed  the 
gains  that  have  accumulated  during  the  same  period,  then  there 
is  shown  by  this  account  an  impairment  of  capital.  On  the  other 
hand,  if  the  undivided  profits  exceed  the  losses,  then  the  balance 
in  this  account  shows  an  increase  of  capital  in  the  business  and 


Dr. 


IlirAIBMKNT   AND  SURI'LIIS 


Cr. 


IjObr«8  bronght  from  Lobs  and 
Gain  Acvuuut 


Dr.  Balance— Net  amount  of 
Impairment  of  Capital 


Undivided  proftiB  brought 
from  UlvldendB  and  Dlvl- 
alona 


Cr.  Balance— Net  amount  of 
Sarplns  or  Undivided  Proflta 


represents  that  which,  as  before  stated,  is  variously  termed^Re- 
serve  Fund  or  Surplus.  An  entry  between  Impairment  and  Sur- 
plus Account  and  Capital  Account,  as  already  intimated,  is  to  be 
made  only  in  pursuance  of  formal  action  upon  the  part  of  the  pro- 
prietor or  partners,  or  by  the  stockholders,  as  the  case  may  be. 
It  is  never  to  be  made  at  the  discretion  of  the  bookkeeper  alone. 


;it 


raggri'aTrtTi^tnr^ 


iliaiWirimyMijffI 


34 


TiiK  sKi.i' rnoviN'o 


Provision  is  made  in  the  Sclf-Provinij  Accounting  System, 
as  will  be  seen  as  we  go  along,  for  frequent  determinations  of  the 
results  of  the  business.  It  is  recommended  that  Loss  and  Gain 
Account  shall  be  closed  as  often  as  once  a  month.  In  many  lines 
of  business  during  certain  portions  of  the  year  a  very  profitable 
l)usiness  is  conducted,  while  during  other  portions  of  the  year 
trade  is  without  any  pt  ofits,  if  not  conducted  at  an  actual  loss.  A 
careful  scrutiny,  therefore,  of  the  accounts  just  described,  par- 
ticularly with  reference  to  the  credit  side  of  Dividends  and  Divis- 
ions, which,  as  explained,  represents  net  profits,  and  the  debit 
column  of  Impairment  and  Surplus,  which,  as  also  explained,  rep- 
resents net  loss,  will  always  be  extremely  instructive  to  the  man- 
aging man  in  charge  of  the  business. 

Before  leaving  the  accounts  which  belong  particularly  to  the 
proprietor  of  the  business,  brief  attention  should  be  given  to  the 
reasons  which  underlie  this  scheme  of  division  and  also  to  certain 
exceptions  which  may  be  taken  to  the  plan  proposed.  The  pro- 
prietor of  a  business  invests  the  capital  which  he  puts  into  that 
business  with  the  expectation  of  making  a  profit.  Whatever  the 
business  gains  is  to  be  his.  This  proposition,  properly  considered, 
carries  with  it  the  reverse — namely,  that  whatever  losses  the  busi- 
ness sustains  he  must  stand.  If  he  is  entitled  to  the  profits,  then 
he  must  bear  the  losses.  Again,  if  the  proprietor  is  to  have  the 
benefits  of  the  business,  whatever  they  may  be,  then  in  turn  he 
must  stand  the  expense  of  conducting  the  business.  In  many  ar- 
rangements of  accounts  the  expenses  of  doing  business  are  con- 
sidered, in  so  many  '•  ords,  losses  of  the  business.  We  prefer,  how- 
ever, to  distinguish  :ween  the  expenses  of  conducting  a  business 
and  the  losses  made  i.i  the  business;  hence  the  presence  of  two  ac- 
counts where  occasionally  but  one  is  employed. 

In  our  enumeration  of  the  expenses  of  doing  business  above 
presented  we  have  included  all  the  usual  expenditures  of  a  busi- 


■■Jiittmimm'^fmm 


*W* 


System, 
ms  of  the 
nnd  Gain 
lany  lines 
)rofital)le 
the  year 

loss.  A 
bed.  ])ar- 
lul  Divis- 
the  debit 
ined.  rep- 
tile nian- 

■ly  to  the 
en  to  the 
:o  certain 
The  pro- 
into  that 
tever  the 
•nsidered. 
the  busi- 
»fits,  then 
have  the 
1  turn  he 
many  ar- 
are  con- 
ifer, how- 
1  business 
)f  two  ac- 

ess  above 
of  a  busi- 


Jie€fOrXTl.\(i    SYSTKM  W 

ncss,  with  one  important  omission,  and  to  that  we  now  direct  at- 
tention. A  very  considerahle  item  of  cost  in  connection  with 
merchandising:  i*  that  of  freight  on  poods.  'J'his  item  has  been 
omitted  in  tluj  h^  of  expenditures  that  precedes,  because  freight 
on  goods  represents  not  an  expense  of  doing  business,  but  instead 
is  a  part  of  the  cost  of  the  merchandise  that  it  is  the  purpose  of  the 
business  to  sell.  This  matter  will  be  more  fully  explained  when 
we  come  to  a  consideration  of  the  Merchandise  Account. 

Let  us  now  consider  the  accounts  of  the  business  itself,  or  the 
accounts  recording  the  transactions  of  the  business.  Business 
transactions  in  general  may  be  classified  as  commercial  and  finan- 
cial. The  commercial  transactions  divide  into  Buying  and  Sell- 
ing and  the  financial  transactions  into  Credits  and  Payments.  In 
a  merchandising  business  everything  must  be  bought  or  other- 
wise procured  as  a  preliminary  to  selling.  In  the  buying  there  is 
either  the  matter  of  paying  for  the  goods  or  obtaining  credit, 
which  means,  of  course,  arranging  for  deferred  payments.  In  the 
selling  of  the  goods  there  is  either  the  matter  of  receiving  the 
money  or  property  that  is  given  in  exchange  for  the  same  or  ex- 
tending credit,  which  means,  of  course,  arranging  to  take  pay- 
ments at  a  future  time.  The  payments  made  for  goods  that  are 
bought  may  be  in  the  form  of  cash  or  in  the  form  of  notes  or  ac- 
ceptances (payable),  and  the  payments  made  by  others  to  the  busi- 
ness may  also  be  in  the  form  of  cash  or  in  the  shape  of  notes  or 
acceptances  (receivable). 

A  business  may  buy  and  sell  services  as  well  as  merchandise 
or  property  in  general.  It  may  be  conducted  upon  the  plan  of 
selling  the  services  or  skill  of  the  proprietor  exclusively  or  upon 
that  of  buying  the  services  and  skill  of  others  and  selling  the  same 
in  the  open  market;  all  of  which  goes  to  show  that  our  analysis 
applies  to  various  lines  of  professional  business  as  well  as  to  those 
branches  in  which  tangible  goods  are  handled. 


I 


'■; 


II 


THE    SELF-PROVINa 


i  il 


{ I 


1 11 


Let  us  next  give  attention  to  the  things  and  persons  with 
which  the  transactions,  both  commercial  and  financial,  are  had, 
and  the  accounts  that  are  necessary  to  correctly  represent  the 
same.  These,  on  the  one  hand,  are  Resource  Accounts,  embrac- 
ing accounts  with  Property,  Money  and  Debtors,  and  the  written 
promises  of  others  to  pay,  called  Notes  Receivable.  On  the  other 
hand,  they  are  Liability  Accounts,  embracing  Accounts  with  Cred- 
itors, together  with  the  written  promises  to  pay  others,  called 
Notes  Payable. 

Property,  in  the  sense  in  which  we  have  used  the  term  above, 
may  be  defined  as  values  of  any  kind,  and  includes  such  items  as 
Merchandise,  goods  or  wares  of  any  sort.  Real  Estate,  Bank  Stock, 
Bonds,  etc.  The  definition  here  offered  applies  to  merchandise, 
whether  goods  are  bought  from  others  complete  or  are  con- 
structed or  finished  by  the  concern.  , 

Money,  as  the  term  is  used  in  bookkeeping,  consists  of  coin, 
currency,  bank  notes  and  checks  or  bank  drafts,  together  with 
postal  orders  and  express  orders.  The  inclusive  term  is  Cash,  by 
which  name  the  account  is  known.  The  Cash  Account  is  usually 
the  most  important  of  all  the  Resource  Accounts.  It  is  that  into 
which  all  the  values  represented  by  the  other  accounts  are  from 
time  to  time  converted  and  the  standard  by  which  all  the  accounts 
are  measured. 

The  debtors  of  the  business  are  those  who  have  not  paid  for 
what  they  have  received,  and  who,  therefore,  are  in  debt  to  the 
business.  A  distinction,  so  far  as  bookkeeping  is  concerned,  is 
made  between  an  open  account  against  a  debtor  and  the  amount 
which  he  owes  on  a  note  or  acceptance.  A  separate  account  is 
opened  for  the  amounts  owing  to  the  business  on  notes  and  ac- 
ceptances called  Notes  Receivable  Account.  It  takes  care  of  all 
the  paper  that  is  received  by  the  concern,  while  the  amounts  owing 
by  debtors  are  shown  by  the  accounts  bearing  their  names.     A 


■  -■-■«<jpwmwww^jiiiijmi 


ACCOUNTING    SYSTEM 


37 


irsons  with 
il,  are  had, 
)resent  the 
ts,  embrac- 
the  written 
n  the  other 
with  Cred- 
iiers,  called 

;erm  above, 
ch  items  as 
Bank  Stock, 
lerchandise, 
)r  are  con- 

ists  of  coin, 
^ether  with 

is  Cash,  by 
tit  is  usually 

is  that  into 
Its  are  from 
he  accounts 

not  paid  for 
debt  to  the 
oncerned,  is 
the  amount 
e  account  is 
otes  and  ac- 
;s  care  of  all 
ounts  owing 
■  names.     A 


debtor,  therefore,  may  owe  in  two  forms.  He  may  be  indebted  to 
the  concern  for  an  amount  on  account  and  also  for  another 
amount  represented  by  a  note  or  an  acceptance. 

The  creditors  of  a  business  are  the  persons  who  have  not  been 
paid  for  what  they  have  supplied  to  the  business.  They  are  those 
who  have  extended  credit  to  the  business,  and  this  credit  may  be 
on  the  basis  of  notes  or  acceptances  which  they  have  taken  or  on 
open  account.  Notes  and  acceptances  issued  to  others  are  re- 
corded in  what  appears  in  this  analysis  as  the  Notes  Payable  Ac- 
count, while  the  open  accounts  are  treated  in  a  class  by  them- 
selves. It  is  possible,  therefore,  for  the  business  to  be  indebted 
to  a  single  creditor  in  two  forms— f\rst,  in  an  amount  represented 
by  an  open  book  account,  and,  second,  in  another  amount  repre- 
sented by  a  note  or  an  acceptance. 

While  all  the  accounts  with  transactions,  so  far  as  the  nature 
of  the  accounts  is  concerned,  divide  into  Resources  and  Liabili-' 
ties,  those  accounts  alone,  it  should  be  borne  in  mind,  do  not  rep- 
resent the  business  in  its  entirety.  The  actual  capital  of  the  busi- 
ness, vcpresented  by  the  difference  between  all  the  resources  of  the 
business  and  all  its  liabilities  to  others  than  the  owners,  is  a  lia- 
bility of  the  business  to  the  owners,  a  fact  that  should  not  be  over- 
looked, because  it  is  fundamental  to  a  correct  balance  sheet. 

We  next  come  to  a  consideration  of  the  Property  Accounts 
of  the  busine<s.  These  accounts,  broadly  stated,  are  each  to  be 
debited  at  the  outset  with  the  amounts  on  hand  or  the  amounts 
owing  to  the  concern,  as  the  case  may  be,  at  that  date,  and,  as  the 
business  proceeds,  are  to  be  debited  with  additions  and  increases 
and  are  to  be  credited  with  what  is  sold  or  otherwise  parted  with. 
At  the  outset  Merchandise  Account  is  to  be  debited  with  the 
amount  of  goods  on  hand  or  with  the  inventory.  It  is  further  to 
be  debited  with  all  the  purchases  that  are  made,  and  is  to  be  cred- 
ited with  the  sales  as  they  occur,  including  both  the  cost  of  the 


mm^sm^s<msmms--^x 


I 


;  s 


til 


'I 


SM 


IW  THE    SELF-rKOVIXr, 

goods  and  the  profit  that  is  made  thereon,  assumhig  for  the  mo- 
ment that  a  profit  is  being  made.  Then  the  difference  between 
the  debit  side  and  the  credit  side  will  show  a  gain  or  a  loss,  as  the 
case  may  be. 

Merchandise  Account,  however,  considering  it  in  its  relation- 
ship t    a  trading  business,  may  be  advantageously  subdivided,  be- 


m. 


BuTiNO  Account 


Cr. 


(ioodg  on  hand  per  Inventory 
Goods  bought  (inchidlng 
freight  and  cartage) 


Dr.  Balance—Inventory 


CorrectioiiB 
Goods  Upturned 
Goods  Ht  cost  carried  to 
8eillug  Account 


cause  there  are  various  features  about  it  to  be  watched  which  can- 
not be  as  well  attended  to  when  the  account  is  kept  a  unit  as  when 
it  is  differently  arranged.  Two  distinct  classes  of  records,  or, 
rather,  the  records  of  two  different  kinds  of  transactions,  are  to  be 
made.  On  the  one  hand  we  have  the  purchases  of  goods  and  on 
the  other  hand  the  sales.     A  complete  account  is  needed  for  each 

Dr.  Sellino  Account  Cr. 


Goods  at  Cost 

brought  from  Buying  Account 
or  Any  Product  Accoant 
(Manufacturing) 

Goods  Keturned 

Corrections 


Dr.  Balance— Loss.  (To  be 
carried  to  Loss  and  Gain 
Account) 


Goods  sold  at  Selling  Prices 


Cr.  Balance=-t.aiu.  (To  be 
carried  to  Loss  and  Gain 
Accoant) 


of  these,  because  of  the  cross  entries  to  be  made  between  the  two 
parts  at  closing,  and  more  particularly  by  reason  of  the  corrections 
that  are  necessary  to  be  made  in  each  from  time  to  time.  We 
need  a  debit  and  a  credit  column  in  the  account  of  purchases,  which 
we  will  cal'  Buying  Account,  because  there  are  frequent,  correc- 
tions in  invoices  and  occasionally  goods  are  returned  which  have  to 


ACCOUNTING    SYSTEM  "~  ' 


30 


be  charged  back.  In  the  same  way  with  respect  to  sales,  which 
we  will  call  the  Selling  Account,  we  need  both  a  debit  and  a  credit 
column,  because  customers  sometimes  return  goods  and  because 
the  business  is  occasionally  obHged  to  allow  discounts  or  rebates. 
It  is  always  desirable  to  know  the  net  amount  of  goods  pur- 
chased, and  this  can  be  shown  only  by  keeping  Buying  Account 
separate  and  distinct  from  sales.  On  the  other  hand,  it  is  always 
desirable  to  be  able  to  show  the  net  amount  of  goods  sold,  and  this 
is  possible  only  when  Selling  Account  is  kept  independent  of  every 
other  feature. 

These  considerations  alone  would  justify  the  division  of  the 
Merchandise  Account  into  Buying  and  Selling,  but  a  still  more 
important  reason  exists  for  this  measure,  and  that  is  the  de- 
termination of  results  as  the  business  proceeds.  To  this  we  shall 
next  give  attention. 

In  the  intelligent  management  of  a  merchandising  business 
it  is  essential  to  know  at  all  times  the  cost  of  goods  as  well  as  the 
selling  prices.  Indeed  it  is  customary  in  various  directions  for 
costs  to  be  carefully  recorded,  f\rst  in  u  cost  book,  which  is  an  ab- 
stract of  invoices,  and  second  upon  tags  or  tickets  attached  to  the 
goods.  With  both  cost  price  and  selling  price  thus  available,  to 
be  extended  as  the  goods  are  disposed  of,  there  becomes  possible 
certain  cross  entries  between  the  Buying  Account  and  Selling 
Account  by  which  the  real  results  of  the  transactions  may  be  kept 
constantly  in  sight. 

Buying  Account  is  debited  at  the  outset  with  the  amount  of 
goods  on  hand.  It  is  debited  from  time  to  time  with  the  goods 
bought.  Now,  if  from  the  sum  of  these  two  amounts  there  is  sub- 
tracted the  goods  sold,  taking  those  goods  at  cost  prices,  there 
remains  in  Buying  Account  an  amount  representing  the  cost  of  the 
goods  on  hand.  Crediting  Buying  Account  with  the  amount  is, 
of  course,  the  same  as  subtracting,  as  above  described. 


I 
I 

I 


.  ':.*»Wir,'^''-",  "Vc''«.^ 


>.!  P, 


III 


ill  i 


40 


THE    SELF-rROVING 


Selling  Account  from  time  to  time  is  credited  with  the  goods 
sold  at  selling  prices.     If  it  is  debited  in  like  manner  with  the  cost 

Dr.  MANnrACTliBiNO  Lkdoeb    (Collocllvc)    Somttimes  called  Factory  Accouiit  Cr. 


Total  debit  Items  of  all  the 
Individual  accounta  of  this 
class 


Dr.  Balance— Materials  on  hand 
and  cost  of  goods  In  process 
of  making 


Total  credit  Items  of  all  the 
individual  accounu  of  tblt 
class 


of  the  goods  sold— in  other  words,  with  the  same  amount  that  has 
been  credited  to  the  Buying  Account— the  balance  in  Selling  Ac- 
count will  show  the  gross  profit  (or  loss)  made  on  the  transaction. 

Pr.  Ant  Materiai.  Account    (Manufacturing)       ■ Cr^ 


Amount  on  hand  at  beginning 

Purchases 

Freight  and  Cartage 


Dr.  Balance— Amount  on  hand 
(including  amount  not  yet 
distributed) 


Corrections 

Amounts  carried  to  Product 
Accounts 


Some  of  the  goods  which  are  sold  in  a  merchandising  business 
are  sometimes  manufactured  in  a  special  department  of  that  busi- 
ness.    In  fact,  a  Manufacturing  Account,  either  in  the  sense  of 

j)f  Ant  Cost  Account    (Manufacturing) Cn 


Actual  Expenditure 


Dr.  Balance— Amount  not  yet 
distributed 


Corrections 

Amounts  carried  to  Product 
Accounts 


representing  a  complete  department  or  as  a  minor  division  main- 
tained simply  for  convenience,  is  the  rule  rather  than  the  excep- 


mm 


th  the  goods 
vith  the  cost 


CCOIlIlt 


Cr. 


lit  itcmB  of  all  the 
ual  accouata  of  tbii 


Hint  that  has 
11  SelHng  Ac- 
;  transaction. 

Or. 


tione 

itB  carried  to  Product 

ounta 


ising  business 
-  of  that  busi- 
1  the  sense  of 

Cr. 


ana 

a  carried  to  Product 

uDta 


division  main- 
lan  the  excep- 


ACCOUXTING    SYSTEM 


m 


tion,  and  therefore  in  this  classification  a  word  or  two  is  appro- 
priate with  respect  to  its  relationship  to  the  other  accounts.  So 
far  as  concerns  our  present  requirements,  the  iManufacturing  Ac- 
count may  be  treated  as  a  unit  or  as  a  single  account,  with  the 
broad  statement  that  whatever  applies  to  the  one  account  would 
apply  as  well  to  the  several  accounts  into  which  it  would  be  di- 

jjj.  Ant  Product  Account    (Manufactiirlns) 


Cr. 


All  Itema  of  cost 

Materlala 

Labor 

General  Expense 


Dr.  Balance— A  mount  on  hand 
at  coat  prlcci>. 


Corrections 

Product  at  cost  carried  to 
liuyinK  Account 


vided  in  case  various  separate  parts  were  to  be  maintained  for  the 
purpose  of  statistical  records. 

The  Manufacturing  Account  is  to  be  considered  as  a  special 
division  of  the  Merchandise  Account.  It  is  to  be  debited  witli  all 
the  costs  that  enter  into  the  goods  produced— namely,  materials, 
labor,  power,  rent,  depreciation  of  machinery,  etc.— and  is  to  be 

jj,_  Oenbbal  Expensbb    (Manufacturing)  


Cr. 


All  Itema  of  Expense  which 
canuot  \>e  reiidlly  charged 
to  the  several  product  ac- 
counts, like  Superintend- 
ence, Taxes,  Insurance, 
Power,  Repairs,  Deprecia- 
tion of  Plant,  etc. 


Dr.  Balance— Deficiency  In 
charge.  (To  be  carried  to 
Loss  and  Gain  Account) 


Corrections 

Amount  charged  (by  estimate) 
to  Product  Accounts 


Cr.  Balance— Amount  of 
Excessive  Charge.  (To 
be  carried  to  Loss  and 
Gain  Account) 


credited  from  time  to  time  with  the  goods  produced  at  cost.  This 
result  will  be  accomplished  by  some  such  a  system  in  the  estab- 
lishment as  would  be  the  equivalent  of  the  Buying  Account  buying 
from  the  Manufacturing  Account  the  goods  produced.  Buying 
Account  should  take  over  the  goods  at  their  cost  price,  and  it 
should  be  the  account  to  carry  them  in  stock  until  such  time  as 


#■■ 


:S?p-.'!9.T^. 


;  I 


48 


THE    SELF-PROVINO 


they  are  sold.  Then  Selling  Account  should  take  them  out  of 
Buying  Account  at  cost,  just  the  same  as  though  they  were  goods 
that  had  been  brought  into  the  concern  from  some  other  ma.iu- 
facturing  establishment,  and  by  its  records  should  show  the  profit 
or  loss  at  which  they  are  sold. 

The  function,  then,  of  Manufacturing  Account  is  to  keep 
track  of  the  cost  of  goods  produced  and  to  turn  them  over  at  cost 
to  the  Buying  Account.  It  is  the  function  of  Buying  Account  to 
carry  the  goods  on  hand,  whether  made  in  the  concern  or  brought 
in  from  other  establishments,  and.  in  turn,  to  hand  the  goods  over 
to  Selling  Account  as  they  are  sold.  Finally,  it  is  the  function 
of  Selling  Account  to  take  the  goods  at  cost  from  Buying  Ac- 
count and  to  show  the  disposition  made  of  them,  whether  result- 
ing in  a  profit  or  a  loss. 

Any  balance  in  Manufacturing  Account  will  represent  material 
on  hand,  or  goods  in  process  of  construction,  or  costs  incurred,  but 
not  distributed.  All  this,  however,  is  more  fully  discussed  in  an- 
other place. 

A  word  right  here  with  respect  to  the  management  of  Buying 
Account  may  serve  to  more  cleariy  illustrate  the  nature  and 
method  of  conducting  that  account.  It  has  been  stated  that  the 
balance  in  this  account,  when  treated  in  the  manner  here  de- 
scribed, will  always  show  the  inventory  of  goods  on  hand.  or.  in 
other  words,  the  goods  on  hand  at  cost  prices.  It  is  the  usual  rule 
with  merchants  to  take  an  inventory  from  time  to  time  for  the 
purpose  of  ascertaining  the  amount  of  stock  on  hand.  They  de- 
pend upon  this  plan  for  deterr  lining  the  amount  of  stock,  because 
no  such  account  as  the  Buyin,-  Account  here  described  has  been 
kept.  The  Buying  Account,  properly  conducted,  saves  this  in- 
vestigation into  stock  on  hand  for  all  purposes  except  to  verify 

the  account. 

It  is  customary  at  the  end  of  the  day,  in  balancing  the  cash 


■smwBsm-tMJ^s^'^. 


sae 


them  out  of 
;y  were  goods 
:  other  nia.iu- 
low  the  profit 

tit  is  to  keep 
n  over  at  cost 
\g  Account. to 
:rn  or  brought 
he  goods  over 
5  the  function 
n  Buying  Ac- 
,'hether  result- 

esent  material 
s  incurred,  but 
iscussed  in  an- 
ient of  Buying 
le  nature  and 
stated  that  the 
uiner  liere  de- 
Dn  hand,  or,  in 
s  the  usual  rule 
0  time  for  the 
and.    They  de- 
stock,  because 
;ribed  has  been 
,  saves  this  in- 
xcept  to  verify 

mcing  the  cash 


ACC0UXTIX(3    SYSTEM 


43 


book,  to  count  the  cash  in  the  drawer,  not,  however,  for  the  pur- 
pose of  discovering  how  much  is  on  hand  in  the  sense  of  determin- 
ing the  balance,  but  for  the  purpose  of  proving  the  correctness  of 
the  cash  book.  The  function  of  the  cash  book  is  to  record  receipts 
and  disbursements  and  to  show  by  its  balance  the  amount  on 
hand.  Counting  the  cash  proves,  first,  the  correctness  of  the 
book,  and,  second,  that  no  pilfering  has  been  done.  With  the 
Buying  Account,  conducted  as  here  described,  inventorying  from 
time  to  time  would  be  undertaken  for  the  purpose  of  proving  the 
correctness  of  that  account,  and  lor  the  further  purpose  of  discov- 
ering "leaks."  It  is  the  custom  of  business  men  to  rely  upon 
their  cash  books  between  times  for  a  statement  of  the  cash  on 
hand  available  for  use,  and  so  it  is  the  habit  of  merchants  who  con- 
duct a  Buying  Account  as  here  described  to  rely  between  times 
upon  the  balance  which  it  shows  for  the  amount  of  goods  on  hand. 

The  Buying  Account,  conducted  as  here  described,  provides 
an  important  link  in  the  chain  of  accounts  constituting  the  balance 
sheet  of  the  business.  The  balance  in  Merchandise  Account,  as 
commonly  conducted,  must  necessarily  be  affected  by  the  profits 
or  the  losses  growing  out  of  the  business  conducted,  and  there- 
fore it  is  never  a  correct  representation  of  the  inventory.  By  the 
division  of  Merchandise  into  Buying  and  Selling,  as  here  described, 
profits  or  losses  are  shown  separate  and  distinct  from  the  in- 
ventory, and,  in  turn,  the  inventory  is  shown  as  it  really  is,  and  un- 
influenced by  the  results  of  the  transactions  which  have  occurred 
since  an  account  of  stock  was  taken. 

The  advantages  following  upon  this  plan  of  dividing  the  Mer- 
chandise Accounts  are  numerous,  and  considerable  space  might 
be  devoted  to  their  presentation.  Aside  from  those  to  which  al- 
lusion has  already  been  made  there  is  only  one  to  which  we  will 
stop  to  give  attention  in  this  connection.  By  keeping  profits  and 
losses  apart  and  distinct  from  goods  on  hand,  and  by  keeping  such 


ms^imm 


^  THE    SELF-PROVIXG 

an  account  with  goods  on  hand  as  will  always  show  the  correct 
balance,  a  most  excellent  foundation  is  supplied  for  the  claim 
against  an  insurance  company  when  a  f^re  occurs.     This  advantage 
alone  would  warrant  the. small  trouble  of  maintaining  the  account. 
In  various  lines  of  business  a  number  of  Merchandise  Ac- 
counts are  sometimes  required.    The  merchant  may  deal  in  classes 
of  goods  so  unlike  each  other  as  to  make  it  desirable  to  keep  them 
apart,  so  far  as  the  records  go.    He  may  deal  in  classes  of  goods 
on  which  the  profits  are  so  unlike  in  the  way  of  percentages  to 
make  it  desirable  for  statistical  purposes,  as  well  as  for  other  rea- 
sons, to  maintain  separate  Merchandise  Accounts.     In  all  such 
cases  each  account,  by  whatever  name  called,  is  divided  into  a 
Buying  and  a  Selling  Account,  to  be  conducted  upon  the  lines 

above  described. 

Again,  in  department  stores  it  is  frequently  required  that  an 
account  be  kept  with  the  merchandise  in  each  department.  In 
this  case,  as  in  the  others,  the  several  resulting  Merchandise  Ac- 
counts are  to  be  subdivided  into  the  Buying  Account  and  the  Sell- 
ing Account,  thereby  showing  at  all  times  by  the  balance  in  the 
Buying  Account  the  goods  on  hand  in  the  department  named,  and 
by  the  balance  in  Selling  Account  the  gross  profits  (or  losses) 
which  the  department  is  making. 

In  passing,  we  should  call  attention  to  the  items  which  con- 
tribute to  the  cost  of  goods,  as  distinguished  from  certain  other 
items  which  belong  in  the  class  of  expenditures  already  referred  to 
as  the  expenses  of  doing  business.  Very  little  thought  will  be  re- 
quired to  show  that  the  expenses  of  doing  business  are  entirely 
distinct  from  the  cost  of  goods,  and  a  little  additional  reflection 
will  show  that  whatever  aflfects  the  cost  of  merchandise  in  itself 
should  be  debited  to  the  Buying  Account.  Boxing,  cartage  and 
freight  are  certainly  chargeable  to  the  Buying  Account, 'because 
they  represent  a  part  of  the  cost  of  the  goods  brought  to  the  place 


'■^SsSssssasfts 


the  correct 
)r  the  claim 
is  advantaf^e 
the  account. 
;hanclise  Ac- 
eal  in  classes 
o  keep  them 
;ses  of  goods 
rcentages  to 
or  other  rea- 

In  all  such 
ivided  into  a 
3on  the  lines 

uired  that  an 
artment.  In 
chandise  Ac- 
and  the  Sell- 
•alance  in  the 
\t  named,  and 
ts  (or  losses) 

ns  which  con- 
certain  other 
dy  referred  to 
ght  will  be  re- 
is  are  entirely 
)nal  reflection 
indise  in  itself 
y,  cartage  and 
:ount, 'because 
hi  to  the  place 


•  ACCOUXTIXO    SYSTEM  '     "  • 

of  sale.  On  the  other  hand,  all  expenses  which  have  to  do  with 
the  sale  of  the  goods,  and  which  we  have  previously  enumerated 
in  part,  belong  in  the  other  class— namely.  Expenses  of  Doing 
Business. 

With  the  Selling  Account  kept  in  the  manner  above  de- 
scribed, being  debited  from  time  to  time  with  the  goods  sold  at 
cost  prices  and  being  credited  at  the  same  time  with  the  goods 
disposed  of  at  selling  prices,  it  should  be  closed  at  proper  intervals 
with  the  balance  that  has  resulted  from  the  transactions,  whether 
a  debit  or  credit,  carried  to  Loss  and  Gain  Account.  At  the  same 
time  the  Expenses  of  Doing  Business,  representing  in  this  regard 
the  costs  for  the  corresponding  period,  should  Ukewise  be  closed 
into  Loss  and  Gain. 

Good  business  practice  warrants  the  closing  of  the  Selling 
Account  and  the  Expense  AccounL  In  this  manner  as  frequently 
as  once  a  month.  Many  lines  of  business  would  do  well  if  the  clos- 
ing entries  were  made  as  often  as  once  a  week.  In  the  arrange- 
ment of  accounts  in  the  Self-Proving  System  the  entries  necessary 
to  the  closing  may  be  made  just  as  frequently  as  desired  and  at 
regular  or  irregular  intervals. 

When  the  Expense  Accounts  and  the  Selling  Accounts  have 
been  closed  into  Loss  and  Gain,  as  above  described,  then  Loss  and 
Gain  Account  should  be  similarly  closed,  carrying  its  balance,  if 
the  balance  represents  a  profit,  to  the  credit  of  Dividends  and 
Divisions,  as  already  described,  and  if  the  balance  represents  a  loss, 
to  the  debit  of  Impairment  and  Surplus,  as  also  previously  de- 
scribed. 

There  are  other  Property  Accounts  besides  Merchandise  Ac- 
counts to  consider,  but  they  are  in  themselves  so  much  simpler 
than  Merchandise  Account  that  they  will  not  need  nearly  the  time 
that  has  been  devoted  to  Merchandise  Account.  Let  us  next  give 
attention  to  such  a  Property  Account  as  that  of  a  piece  of  Real 


awuwuiwi  .>i'j(i!Jjt,*l>wiw<"wii 


.J 


4<( 


TIIK    HELF-rHf)VIX(» 


II 


Estate,  an  item  which  usually  on  the  books  of  a  business  is  re- 
garded as  an  investment.  Even  though  the  Real  Estate  be  car- 
ried for  some  other  reason  than  investment,  and  because  of  tb.e 
profit  that  is  derived  from  it,  it  is  still  proper  to  treat  it  in  the  ac- 
count as  though  it  were  an  investment.  If,  for  example,  a  piece  of 
real  estate  is  carried  at  a  loss  simply  because  of  some  advantage 
gained  in  another  department  of  the  business,  it  is  only  right  that 
the  books  should  show  the  amount  of  that  loss,  in  order  that  the 
deficit  in  the  one  case  may  be  properly  compared  with  the  surplus 

in  the  other. 

It  will  perhaps  occur  to  the  reader,  in  the  light  of  the  division 
that  we  have  made  in  the  Merchandise  Account  above,  that  every 
Property  Account  has  two  sides  to  be  considered,  or,  rather,  two 

j)P_  Ant  Pkopihtt  Accocmv  Cr. 


A'ahie  at  beginning 
Amount!  boaght 
Improvemeuts 


Dr.  Balance-Lon.  (To  be 
carried  to  Loas  and  Oaln 
Account) 


Amount  diapoaed  of 


(In  doting,  credit  tht  Aceovnt 
with  Avptrty  on  hand  at 
valut) 


Cr.  Balance-Gain.  (To  be 
rarried  to  Lou  and  Gain 
Account) 


classes  of  records  to  be  maintained.  This  is,  in  a  sense,  true. 
There  is,  first,  the  investment,  independent  of  cost  of  maintenance 
and  of  revenue,  and,  second,  there  is  the  maintenance  and  the 
revenue  to  be  considered,  independent  of  the  investment.  The 
profits  that  may  grow  out  of  a  piece  of  real  estate  are  twofold  in 
cliaracter— first,  increase  in  value  by  reason  of  advancing  prices 
on  account  of  location  and  environment,  and,  second,  actual  gains 
by  the  returns  in  the  way  of  rent  being  larger  than  the  cost  of 
maintenance,  the  latter  including  such  items  as  taxes,  repairs,  in- 
surance, expense  of  caretakers,  etc. 

Two  accounts,  then,  are  to  be  opened  with  each  piece  of  real 
estate.     The  first  may  be  called  Real  Estate  Investment  Account, 


ii 


.JSJUMMt.^." 


iiness  is  re- 
tate  be  car- 
ause  of  tl'.e 
it  in  the  ac- 
e,  a  piece  of 
:  advantage 
y  right  that 
ier  that  the 
the  surphis 

the  division 

;,  that  every 

rather,  two 

Cr. 
Amount  diapoaed  of 


U  Account 
n  hand  at 


sense,  true, 
maintenance 
nee  and  the 
tment.  The 
re  twofold  in 
incing  prices 

actual  gains 
1  the  cost  of 
s,  repairs,  in- 

piece  of  real 
ent  Account, 


accounting;  system  IT 

and  is  to  be  debited  with  the  cost  of  the  property  and  with  all  ad- 
ditions or  betterments  made  thereto.  It  is  to  be  credited  with  any 
portion  sold,  and  on  closing  the  books  it  is  to  be  credited  with  the 
inventory  value  of  the  property  remaining  on  hand.  The  balance, 
then,  will  show  a  profit  or  a  loss,  as  the  case  may  be,  on  the  invest- 
ment, independent  of  the  use  that  has  been  made  of  the  property 
and  the  cost  of  maintenance. 

Dr.  Ukal  Estate    (Invcatmcnt)  Cr. 


Value  at  Ix-ginniiig 
Addliinni  and  I'urcbaiei 
Bettvrmenta 


Amount  dlipoovd  or 


Dr.  Balance— LoTO,  (To  lie 
carrii'd  to  Lomi  and  Uain 
Account) 


(In  doling,  ertdlt  th*  Account 
with  Real  E»tat€  on  hand 
at  valut) 


■Cr.  Balance— Gain.     (To  )« 
carried  to  Lota  and    Gain 


Account) 


The  second  account  with  a  piece  of  real  estate  may  be  called 
Real  Estate  Results  Account,  and  is  to  be  debited  from  time  .to 
time  with  all  the  costs  of  maintaining  the  property,  such  as  taxes, 
oversight,  insurance,  repairs,  etc.,  and  is  to  be  credited  with  the 
income  from  the  property.  The  balance  will  be  either  a  profit  or 
a  loss,  according  to  the  circumstances,  and  will  be  the  results  of 

Dr.  Rkai.  Edtatb    (Reinlts)  Cr. 


Bepairs 

Caretakers 

Inaurance 

Taxes 

All  other  Expenses 


Dr.  Balance— Loss.  (To  be 
carried  to  Loh  and  Gain 
Account) 


Income 


Cr.  Balance— Gain.  (To  be 
carried  to  Loss  and  Gain 
Account) 


the  use  of  the  property,  independent  of  the  amount  of  the  invest- 
ment. By  taking  the  two  accounts  together.  Real  Estate  Invest- 
ment Account  and  Real  Estate  Results  Account,  the  owner  has 
the  opportunity  of  determining  the  real  advantage  of  the  invest- 
ment to  him.     He  needs  the  two  accounts  rather  than  a  single  ac- 


48 


TIIB    REI.FPROVINO 


count  in  order  to  discover  where  he  is  making  or  where  he  is 
losing,  as  the  case  may  be. 

The  same  general  conditions  prevail  in  the  matter  of  stocks 
and  bonds.  One  account  should  be  opened  with  each  lot  of  stocks 
or  bonds,  as  the  case  may  be,  as  an  investment,  and  another  ac- 
count should  be  opened  with  the  same  as  the  results.     In  stocks 


Pr. 


BONIIB      (lllVCHfmiTltl 


CT, 


Amnimt  on  hand  at  beginning 

at  valiK! 
Co*t  of  liondi  bought 


Dr.  B»lancc-Loii.  (To  he 
rnrrlcd  to  Low  and  Gain 
Account) 


Amount  diapoaud  of 


(/»  elMing.  cn-UU  Ih*  Acivunt 
with  Jiondi  on  ^anii  at 
valut) 


Cr.  Batancc-flaln.  (To  bo 
carried  to  Loii  and  Uain 
Account) 


and  bonds  there  is  less  cost  of  maintenance  than  in  the  matter  of 
real  estate,  but  at  the  same  time  the  principle  is  the  same.  It  is 
expedient  to  know  the  net  income  from  the  bonds  or  stocks,  as  the 
case  may  be,  independent  of  the  values  that  may  be  placed  upon 
them.  Taxes  and  assessments  are  also  to  be  recorded.  Stocks 
and  bonds  are  constantly  fluctuating  in  price.     They  arc  to  be 

Dr  Bonds    (ResulU)        ^^ 


Cr. 


Expense*  of  Pnrcha«e 
All  other  Expenses 


Income 


Dr.  Balance-Loss.  (To  ho 
carried  to  Loss  and  Gain 
Account) 


Cr.  Balance-Gain.  (To  be 
carried  to  Lous  and  Gain 
Account) 


watched,  therefore,  not  only  with  regard  to  their  income,  but  also 
with  respect  to  increasing  or  diminishing  market  values.  The 
same  general  principle  Hkewise  appHes  to  other  Property  Ac- 
counts, but  it  is  not  necessary  to  particularize  further  in  this  con- 
nection. '  . 

The  losses  or  gains  resulting  from  investments  in  real  estate 


im 


where  he  is 

ter  of  stocks 
I  lot  of  stocks 
I  another  ac- 
s.     In  stocks 

Cr. 
Amount  diapotud  of 


Ih*  Aei-ount 
m    %imit   at 


bc 
Uln 


the  matter  of 
e  same.  It  is 
stocks,  as  the 
e  placed  upon 
)rdecl.  Stocks 
hey  arc  to  be 

Cr. 
Income 


o  be 
Oatn 


come,  but  also 

t  values.    The 

Property  Ac- 

ler  in  this  con- 

s  in  real  estate 


ACCOrXTINO    SYHTIJM  H 

and  stocks  or  bonds,  as  above  (lcscril)cd,  and  fron'  he  income  from 
the  same,  may  be  transferred  to  one  f^encral  Loss  and  Gain  Ac- 
count in  the  books  and  there  minnle  with  the  profits  an<l  losses 
of  the  business,  nr  the  transfers  may  be  made  directly  to  the  ac- 
counts grouped  under  the  head.  Disposal  of  I'rotits  and  Losses. 
The  latter  course  will  be  preferred  in  some  cases,  because  thereby 

r*''-  StOHK   PlXTUIlKK,   ITC.  (T. 


Value  at  lieglniilng 
AUdltluni 


Dr.  Biilnnce-Not  Coit  of  Fix- 
Uirv.  (Refer  tii  Klxturet 
Dviiruclatiou  Account) 


the  results  of  what,  from  a  business  point  of  view,  may  be  called 
outside  investments  will  be  kept  separate  and  distinct  from  the  re- 
sults of  the  business.  In  following  this  plan  the  profits  made* on 
real  estate  investments,  stock  investments,  bond  investments,  etc., 
would  be  carried  to  the  credit  of  the  account  entitled  Dividends 
and  Divisions.     The  losses  which  are  made  would  be  carried  in  the 

Dr.  Manttfactubino  Plant    (Tools,  Machinery,  FIxtiircg,  etc.)  Cr. 


CoHt  at  beginning 
Amount  buunbt 


Dr.  Balance— Net  Cost  of  Plant 
I  Bef  «r  to  Plant  Depreciation 
Account) 


Amount  Sold 


same  manner  to  the  debit  of  the  account  entitled  Impairment  and 
Surplus.  In  the  same  way  the  profits  appearing^  in  such  accounts 
as  Real  Estate  Results  Account,  in  Stocks  Results  Account  and 
Bonds  Results  Account  would  go  to  the  credit  of  Dividends  and 
Divisions,  and  the  losses  in  the  same  accounts  would  go  to  the 
debit  of  Impairment  and  Surplus. 


J 


nHtm 


50 


THE    SELF-PUOVING 


H' 


Still  another  plan  is  possible  for  meeting  these  conditions,  and 
it  is  presented  for  the  consideration  of  those  bookkeepers  who 
have  numerous  Investment  Accounts  to  manage.  A  special  In- 
vestment Loss  and  Gain  Account  may  be  opened,  distinguishing 
the  usual  Loss  and  Gain  Account  by  some  such  term  for  the  latter 
as  Merchandise  Loss  and  Gain.  Let  the  Investment  Loss  and 
Gain  Account  be  debited  with  the  losses  made  or  appearing  in  the 
Investment  Accounts,  and  in  the  Results  yYccounts  as  well,  and 
credited  with  the  gains.  In  turn,  as  often  as  may  be  desired  let 
the  balance  in  Investment  Loss  and  Gain  Account  be  transferred 
to  Dividends  and  Divisions  or  Impairment  and  Surplus,  as  the 
case  may  be,  just  as  has  been  previously  described  in  connection 
with  the  usual  Loss  and  Gain  Account  of  the  business. 

Complete  classification  of  accounts  would  require  that  Real 
Estate  Investment  Accounts  and  ^'onds  and  Stocks  Investment 
Accounts  should  be  located  in  that  portion  of  the  ledger  devoted 
to  accounts  with  Resources,  while  the  corresponding  Results  Ac- 
counts should  go  into  that  part  of  the  ledger  devoted  to  the  Pro- 
prietor's Accounts,  falling  in  the  subdivision  termed  Results  of 
Transactions.  If  the  business  conducted  were  one  entirely  with 
stocks  and  bonds  and  real  estate,  the  classification  of  accounts 
here  shown  for  the  conduct  of  the  general  business  and  the  ac- 
counts named  herein  would,  of  course,  apply.  The  cost  of  main- 
taining a  piece  of  property,  for  example,  would  be  recorded  in 
some  account  in  the  class  called  Expenses  of  Doing  Business,  while 
the  revenue  from  the  property  would  very  naturally  come  under 
the  head  of  Losses  and  Gains.  In  a  mixed  business,  such  as  we 
assume  most  merchants  are  conducting,  the  principal  line  being 
the  buying  and  selling  of  merchandise,  with  only  an  occasional 
outside  investment,  as,  for  example,  in  a  store  property,  it  is 
thought  wise  to  keep  the  Investment  Results  Accounts  apart  from 
the  Business  Results  Accounts.     Even  in  this  case  the  Invest- 


ACCOFNTIXG    SYSTEM 


51 


onditions,  and 
kkeepers  who 
A  special  In- 
distinguishing 
n  for  the  latter 
tient  Loss  and 
ppearing  in  the 
its  as  well,  and 
f  be  desired  let 
t  be  transferred 
Surplus,  as  the 
d  in  connection 
ness. 

iquire  that  Real 
>cks  Investment 
;  ledger  devoted 
ling  Results  Ac- 
oted  to  the  Pro- 
rmed  Results  of 
)ne  entirely  with 
tion  of  accounts 
iness  and  the  ac- 
rhe  cost  of  main- 
d  be  recorded  in 
12-  Business,  while 
irally  come  under 
siness,  such  as  we 
-incipal  Une  being 
»nly  an  occasional 
ire  property,  it  is 
:counts  apart  from 
s  case  the  Invest- 


ment Results  Account,  by  strict  application  of  the  rule,  would  be 
located  in  the  ledger  in  the  same  general  position  as  the  Business 
Results  Accounts.  We  have  not  so  shown  these  accounts,  how- 
ever, in  the  diagram  of  classification  herewith  presented,  because 
with  the  rare  occurrence  of  outside  investments  in  connection  w'ith 
a  merchandising  business  the  trouble  of  such  classification  would 
be  much  greater  than  the  result  obtained  would  justify.  We  con- 
tent ourselves,  therefore,  with  merely  calling  attention  to  the 
principle  involved  and  explaining  the  method  that  might  be  fol- 
lowed, leaving  the  bookkeeper  to  proceed  in  this  regard  as  to  him 
seems  best  in  view  of  circumstances. 

We  will  next  give  attention  to  Notes  Receivable,  one  of  the 

Dr.  N0TB8  Recbiva'^lk  Cr. 


Notes  and  Acceptances  on  hand 

at  beginning 
Notes  and  Acceptances  Beceived 


Dr.  Balance— Amoant  on  hand 


Notee  and  Acceptances 
disposed  of 


Property  or  Resource  Accounts  shown  in  the  diagram.  This  ac- 
count is  opened  by  debiting  it  with  the  amount  on  hand  at  the 
beginning,  and  i  i  turn  debiting  it  with  notes  and  acceptances  as 
they  are  received.  From  time  to  time  it  is  credited  with  the  notes 
disposed  of,  either  in  the  sense  of  being  paid  out  or  sold  to  others 
or  being  redeemed  by  the  drawers.  A  debit  balance  is  the  only 
balance  possible  in  Notes  Receivable  Account,  and  represents  the 
amount  of  notes  on  hand.  It  is  verified  from  time  to  time  by  com- 
paring with  the  notes  in  hand. 

Another  Resource  Account,  and  a  most  important  one,  to 
which  attention  should  be  given  in  this  connection,  is  that  of  Cash. 
It  is  opened  by  debiting  it  at  the  outset  with  the  amount  of  cash 
on  hand.    It  is  maintained  by  debiting  from  time  to  time  with  cash 


:nninii»«i 


Uj  THE    SELF-rROVIXG 

received  and  crediting  it  with  the  expenditures.  A  balance  in  this 
account  will  be  on  the  debit  side  and  will  represent  the  amount  of 
cash  on  hand.  The  objects  in  view  in  keeping  a  Cash  Account  are 
to  know  the  amount  of  cash  received  and  paid  and  also  the  amount 
o^  cash  on  hand  at  any  given  date.  The  account  is  verified  by 
counting  the  cash  and  comparing  the  amount  found  to  be  on  hand 
with  the  amount  called  for  by  the  account. 

I,,.  CASH  cr. 


Amount  on  hund  at  beginning 
Receipts 


There  are  var7ous  subdivisions  of  the  Cash  Account  possible, 
prominent  among  which  may  be  mentioned  the*  Bank  Account. 
As  a  fact,  the  Bank  Account  is  kept  separate  from  the  Cash  Ac- 
count, although,  as  commonly  regarded,  it  is  a  portion  of  the  Cash 
Account.  The  bank  balance  is  very  generally  carried  on  the  stubs 
of  the  check  book.     It  is  very  commonly  the  rule  to  make  the 

Bank  '  *^ 

Jr.  -' 


Amount  on  deposit 

at  l)eginnlng 
Deposits  ,  ^  ^    ,. 

Proceeds  of  notes  gold  to  it,  or 

dlsconnted 


Amount  withdrawn 
Collection  charge* 


Dr.  Balance— Amount  on  deposit 


Cash  Account  the  inclusive  account,  with  the  result  that  a  part 
of  the  cash  indicated  by  the  account  as  being  on  hand  is  in  bank, 
while  another  part  is  in  the  drawer  or  safe.  Many  business  men 
and  bookkeepers  prefer  to  conduct  the  Cash  Account  in  the  re- 
strictive sense  of  the  term,  limiting  it  to  the  cash  actually  in  hand, 


ance  in  this 
'.  amount  of 
\.ccount  are 
the  amount 
verified  by 
I  be  on  hand 

Cr. 

Expenditures 


unt  possible, 
nk  Account, 
he  Cash  Ac- 
1  of  the  Cash 
on  the  stubs 
to  make  the 

Cr. 


Amount  withdrawn 
Collection  ctiargee 


It  that  a  part 
nd  is  in  bank, 
business  men 
unt  in  the  re- 
tually  in  hand, 


ACCOUXTIXG    SYSTEM  M 

either  in  drawer  or  safe,  as  the  case  may  be,  and  in  turn  maintain 
a  separate  account  with  the  bank.  For  the  purposes  of  classifi- 
cation, so  far  as  we  are  considering  them  in  this  connection,  it  is 
immaterial  which  of  these  two  points  of  view  be  occupied.  \Miat- 
ever  may  be  the  theory,  the  business  man,  as  a  fact,  requires  of  his 
bookkeeper  from  day  to  day  a  report  of  the  amount  of  cash  actually 
on  hand  and  also  of  the  amount  that  is  in  bank  subject  to  draft. 
Therefore  it  is  expedient  to  conduct  this  account  in  such  a  way  as 
always  to  keep  the  two  balances  separate  and  distinct,  the  same  as 
though  two  separate  accounts  were  maintained. 

Among  the  Resource  Accounts  of  a  business  the  Personal  Ac- 
counts or  Accounts  with  the  Debtors  of  the  business  occupy  a 


Dr. 


Ant  DEnTOH 


Cr. 


Amount  owing  at  l)eginning 
Amounts  for  whicli  be  becomes 
liable 


Dr.  Balance— Amonnt  owing 


Cash  Payments 

Notes 

Goods  or  Property 

Corrections 


very  prominent  place.  At  the  outset  each  Personal  Account 
(with  debtor)  is  debited  with  the  amount  owing  to  the  concern. 
In  turn,  iuring  the  period  through  which  the  account  is  open,  it  is 
debited  with  the  amounts  for  which  the  debtor  becomes  liable. 
On  the  other  hand,  it  is  credited  from  time  to  time  with  the  cash 
payments  made,  with  merchandise  returned,  with  corrections  of 
errors,  if  any  have  occurred,  with  notes,  in  case  notes  are  given  or 
turned  over,  and  with  the  goods  that  the  business  receives  from 
the  debtor,  or  with  property  of  any  kind  which  is  set  over  by  the 
debtor  as  a  credit  to  his  account  and  which  is  accepted  therefor. 
The  balance,  if  on  the  debit  side,  represents  the  amount  which 
the  debtor  is  owing.     If  by  any  accident  the  balance  appears 


54  THE    SEI.F-PROVIXG 

upon  the  credit  side  of  the  account  it  shows  the  amount  that  the 
account  has  been  overpaid. 

The  Personal  Accounts  with  debtors  in  the  particular  hue  of 
business  which  we  are  considering  divide  into  two  classes-In- 
stalment or  Lease  Accounts  and  Sundry  Debtors  Accounts. 
Very  few  merchants  conduct  their  business  on  such  narrow  hues 

jj^  PBOPRIBTOR  or  Pi.BWKR'g  Dbawiwo  Accoumt  Ct- 


Amonots  drawn  In  Cwh, 
OoodB  or  other  Property 


Salary 

Allowance  or 

Share  of       „.  ,^     .       . 
Proflti  from  Dividends  and 
Dlvlalona 


I!  I 


Dr.  Balance-Over-draft 


Cr.  Balance— Amount  owing 
to  him 


^nrS^niuS  accounts  with  debtors  of  one  particular  kmd. 
An  Instalment  Account,  as  will  appear  as  we  go  along,  requires 
special  rulings  in  the  ledger  for  its  convenient  conduct,  and  there- 
fore the  Instalment  Accounts  of  the  business  are  kept  separate 
from  the  other  debtor  accounts  for  this  reason,  as  well,  also,  as  for 
the  further  reasons  of  classification.     Open  accounts  with  debtors, 

^  AST  Crbditor 


Amounts  paid  bim  in 
Cash 

Notes  Payable 
Note*  Receivable 
Goods  or  Property 


Amonnts  owing  to  him 

at  beginning 
Becelved  from  him  In 

Cash 

Notes 

Goods  or  Property 


Cr.  Balance— Amonnt  owing  to  him 


by  which  term  is  meant  those  accounts  representing  sales  made  on 
ordinary  terms  of  credit,  are  kept  by  themselves  in  books  specially 
ruled  to  accommodate  such  transactions  and  also  because  for  rea- 
sons of  mere  classification  it  is  expedient  to  keep  accounts  of  this 
kind  by  themselves.  , 

The  Liability  Accounts  of  a  business,  as  shown  by  the  dia- 


ACCOUNTING    SYSTEM 


QB 


lit  that  the 

;ular  Une  of 

;lasses — In- 

Accounts. 

larrow  lines 

Cr. 


Be  or 

■om  Dividends  and 
tns 


ticular  kind, 
ng,  requires 
t,  and  there- 
ept  separate 
1,  also,  as  for 
vith  debtors, 

Cr. 


lonnta  owing  to  him 
at  beginning 
ceived  from  blm  In 

Cash 

Notes 

Ooode  or  Property 


prtohlm 


sales  made  on 
3oks  specially 
cause  for  rea- 
counts  of  this 

n  by  the  dia- 


gram, divide  into  two  general  classes — Notes  Payable  and  Per- 
sonal Accounts  (creditors).  Notes  Payable,  or  Bills  Payable,  as 
the  term  is  very  commonly  written,  is  credited  at  the  opening  of 


Dr. 


Notes  Patabli 


Cr. 


a 


Notes  and  Acceptances  paid 
off  or  redeemed 


Amount  ontatanding 

at  beginning 
Notes  IssDed 
Drafts  accepted 


Cr.  Balance— Amonnt  ontstandlng 


the  books  with  the  notes  outstanding,  and  from  time  to  time  with 
notes  as  they  are  issued  and  with  drafts  as  they  are  accepted.  In 
turn  it  is  debited  with  notes  paid  off  or  redeemed.     The  balance. 


Dr. 

Ant  STOCKnoLOER                                                            Cr. 

Amounts  paid  him  in  Cash, 
Goods  or  other  Property 

Dividend  carried  from  Divi- 
dends and  Divislona 

* 

Cr.  Balance— Dividends 
remaining  unpaid 

which  must  be  on  the  credit  side,  represents  the  amount  in  notes 
and  acceptances  outstanding  for  which  the  concern  is  Hable. 

The  Personal  Accounts  with  the  creditors  of  the  establish- 


Dr. 


Amt  OrricBB,  Clerk  or  Exploteb 


Cr. 


Amounts  paid  him  in  Cash, 
Goods  or  other  Property 


Dr.  Balance— Orer^lraft 


Salary, 
Allowance  or 
Wages 


Cr.  Balance— Amount  owlne 
to  him 


ment  are  very  frequently  divided  into  sub-classes  for  the  purpose  of 
keeping  together  those  representing  one  particular  kind  of  trans- 


_j  THE    SEI-F-PROVIXO 

actions.  For  example,  many  merchants  prefer  .o  keep  those  ac- 
:,nts  which  represent  their  purchases  apart  <- J  ;P-™  ' 
accounts  which  represent  special  liabiht.es  money  ~^'  '  _ 
,t  is  therefore  customary  to  assign  spec.al  ledgers  °  '"-*;■ 
.ions  or  to  assign  to  the™  special  c,iv,s,„ns  ,n  on  ^dger  ^ach 
creditor's  account  at  the  beginning  is  to  be  cred.ted  w.th  what  the 

PUBCHAB*  L«i>o«»   (Collective) 
Dr.  —       ■ 


Total  debit  Items  of  all  the 
Individual  •ccounta  of  in« 


Total  credit  Itenw  of  all  the 
Individual  accounta  of  this 
clasa 


Cr    Balance-Amount  owing 
to  the  clags  collectively 


,uch  additional  amounts  as  the  business  becomes  hable  to  h.m  for. 
r.urn  the  account  is  to  be  debited  with  the  amounts  pa,d  to  htm 
Ihether  in  cash,  notes  or  property.  The  balance  ,f  on  the  cr  d,. 
:  will  show  the  amount  still  owing  to  the  cred.tor,  and,  ,f  on 
the  debit  side,  will  show  the  extent  to  which  the  account  has  been 
overpaid. 


Dr. 


SUNBUT  Cbtoitorb'  L«do«b    (Collective) 


Cr. 


Total  debit  itema  of  all  the 
Individual  accounta  of  this 
claw 


Total  credit  items  of  all  the 
individual  accouuta  of  thla 
claM 


1 


Or.  Balance-Amount  ovfing 
to  the  class  collectively 


=-At  the  outset.T;^S^he  subject  of  <=l'-^'ft""°':  ° 
accounts,  wc  brought  to  the  attention  of  the  reader  '-=  -  "V^ 
of  such  a  classification,  stating  that  the  purpose  -as  to  arrange 
::! unts  in  the  form  of  a  balance  sheet  so  that  mere  re^rence 
thereto  at  any  time  would  reveal  the  real  condttton  of  the  bus. 


ACCOUNTING    SYSTEM 


81 


3  those  ac- 
le  personal 
rowed,  etc 
those  divi- 
Iger.  Each 
th  what  the 

Or. 


t  Items  of  a!l  the 
kl  accounu  of  this 


redited  with 
e  to  him  for. 
paid  to  him, 
on  the  credit 
jr,  and,  if  on 
lunt  has  been 

Or. 


Bdlt  Item*  of  all  the 
dual  accoccta  of  thia 


»tag 

[assification  of 
the  real  object 
7as  to  arrange 
mere  reference 
3n  of  the  busi- 


ness. Manifestly  such  an  examination  would  be  attended  with 
great  difficulty  if  the  accounts  were  presented  in  all  their  details. 
Therefore  plans  are  resorted  to  by  which,  for  balance  sheet  pur- 
poses, the  totals  of  classes  of  accounts  are  used  instead  of  the  ac- 
counts in  detail.  How  this  is  done  will  become  clear  by  some 
examples.     Early  in  this  description  we  referred  to  the  expenses 

Dr.  Sundry  Debtorr'  Lkdhkr    (Collective)  Cr. 


Total  debit  itema  of  all  the 
individual  accounu  of  this 


Dr.  Balance— Amount  owing 
by  the  clasB  collectively 


Total  credit  items  of  all  the 
individual  accountaof  this 
class 


_of  doing  business,  represented  by  as  many  separate  accounts  as 
may  be  desired  by  the  managing  man  for  statistical  purposes. 
We  enumerated  such  accounts  as  taxes,  clerk  hire,  advertising, 
rent,  stationery,  postage,  etc.  We  will  assume  that  an  account  is 
opened  with  each  of  these  items,  to  the  extent  of  six  or  twelve  or 
more,  according  to  the  nature  of  the  business,  and  that  these  sev- 


er. 


INBTALMENT   LKDOER 


Cr. 


Total  debit  Items  of  all  the 
indivldaal  accounts  of  this 


Dr.  Balance—Amount  owing 
by  the  class  collectively 


Total  credit  items  of  all  the 
individual  accounts  of  thia 
class 


eral  accounts  receive  the  items  belonging  to  them.  This  is  neces- 
sary in  order  to  keep  expenses  classified  for  purposes  of  compari- 
son and  direction  as  to  expenditure.  What  is  wanted  for  the  gen- 
eral balance  sheet,  however,  is  the  total  of  these  expenses  in  ine 
item,  and  this  is  secured  by  having  a  general  account,  which  is 
/iebited  with  all  the  amounts  with  which  these  individual  accounts 


08 


THE    SELr-PROVlXO 


are  debited,  and  credited  with  all  the  amounts  with  which  these 
accounts  are  credited.  The  means  for  accomplishing  this  result — 
that  is,  having-  the  expenses  shown  in  detail  in  one  place  and  in 
gross  in  another — will  be  described  in  another  place. 

There  are  numerous  Personal  Accounts  (debtors)  in  a  busi- 
ness. We  have  already  referred  to  the  plan  of  dividing  them  into 
two  classes.  Instalment  Accounts  and  Sundry  Debtors,  but  still 
more  is  required  for  the  convenient  handling  of  these  items.. 
For  purposes  of  the  balance  sheet  we  need  to  have  in  one  amount 
the  total  of  all  the  Instalment  Accounts  and  in  another  amount 
the  total  of  all  the  Sundry  Debtors.  By  means  that  will  be  de- 
scribed further  on  these  accounts  are  kept  in  detail  in  one  place  and 
in  single  accounts  in  another.  Each  of  these  group  accounts,  if 
we  may  use  the  term,  is  debited  from  time  to  time  as  the  individual 
accounts  are  debited,  and  is  credited  from  time  to  time  as  the  in- 
dividual accounts  are  credited.  Accordingly  it  receives  in  gross 
all  that  is  distributed  among  the  individual  accounts  for  which  it 
stands.  Then  the  balance  in  each  of  these  accounts  at  any  date 
will  represent  the  total  of  the  balances  of  all  the  accounts  in  the 
class  which  it  represents. 

The  same  general  remarks  and  methods  apply  to  the  Personal 
Accounts  (creditors)  in  the  business,  which  are  subdivided  first 
into  Purchase  Accounts,  and,  second,  into  Sundry  Creditors.  A 
group  account  is  arranged  for  each  of  these  classes  of  accounts 
which  by  its  balance  shows  in  one  amount  what  would  be  revealed 
by  a  trial  balance  of  all  of  the  individual  accounts  of  the  class  rep- 
resented. 

By  this  process  of  boiling  down  and  condensation  we  have  for 
balance  sheet  purposes  all  of  the  accounts  of  the  business  reduced 
to  the  following  very  small  list: — Cash  (in  drawer  or  safe  and 
bank),  Merchandise  (subdivided  into  Manufacturing,  Buying  and 
Selling),  Accounts  with  Debtors  (in  three  items — Instalment  Ac- 


m 


hich  these 
is  result — 
ace  and  in 


A,.-Jh.:-.^  j,^.^yU;JJ,tt-JiIliil^UJXil-J 


ACCOIXTIXG    SYSTEM 


50 


in  a  busi- 
them  into 
s,  but  still 
lese  items., 
ne  amount 
ler  amount 
will  be  de- 
le place  and 
iccounts,  if 
e  individual 
e  as  the  in- 
^es  in  gross 
[or  which  it 
at  any  date 
junts  in  the 

:he  Personal 
divided  first 
reditors.  A 
of  accounts 
1  be  revealed 
he  class  rep- 

1  we  have  for 
iness  reduced 
or  safe  and 
,  Buying  and 
stalment  Ac- 


RESOURCES 
Cash  : 

In  drawer  (Balance  on  Hand) 

In  bank  (Balance  on  Deposit) 

Merchandise  : 

Manufacturing  Ledger  (Inventory  of  Materials,  etc) 
Buying  (Inventory  ot  Goods  on  Hand) 

Debtors  to  the  Business  : 

Instalment  Ledger  or  Lease  Accounts  (Amount  owing  to  the  business) 
Sundry  Debtors  Ledger  (Amount  owing  to  the  business) 
Notes  Receivable  (Notes  and  Acceptances  on  hand) 

Investments  :  , 

Stocks  and  Bonds  (Inventory  Value) 
Real  Estate  (Inventory  Value) 
Other  Property  (Inventory  Value) 

LIABILITIES 

Creditors  of  the  Business  : 

Purchase  Accounts  Ledger  (Amounts  owing) 

Sundry  Creditors  Ledger  (Amounts  owing) 

Notes  Payable  (Amount  of  Notes  and  Acceptances  out) 

Reserve  Accounts  (Amounts  held  to  make  good  Depreciations 

and  for  bad  debts,  etc.) 
Proprietor's  Account  or  Capital  (net  difference  between 

Resources  and  Liabilities  of  the  Business) 

A  Typical  Balance  Sheet  at  the  Opening  or  Closing  of  the  Books. 


iM 


THE    SELF-rUOVING 


counts.  Sundry  Debtors'  Accounts  and  Notes    Receivable    Ac- 
count), and  Investments  (composed  of  Real  Estate.  Slocks  and 
Bonds).     This  completes  the  accounts  representing  the  Resources 
of  the  business.     Of  Liability  Accounts  we  have  only  Accounts 
with  Creditors  (under  three  heads— Purchase  Accounts.  Sundry 
Creditors  and  Notes  Payable).     There  is  left  the  Results  of  Trans- 
actions (comprised  in  two  accounts,  known  as  Expenses  of  Doing 
Business  and  Losses  and  Gains).  Disposal  of  Profits  and  Losses  (in 
two  accounts— Dividends  and  Divisions  and  Impairment  and  Sur- 
plus), and  Capital  Account,  which,  as  before  explained,  represents 
the  difiference  between  the  Resources  of  the  business  and  the  Lia- 
bilities of  the  business.     How  these  accounts  are  arranged  in  a 
form  to  receive  daily  entries  and  yet  at  all  times  remain  in  balance 
sheet  form  is  fully  set  forth  in  the  chapter  devoted  to  a  considera- 
tion of  the  Private  Ledger  and  Perpetual  Balance  Sheet. 

Before  closing  this  chapter  we  should  call  attention  to  the 
use  made  herein  of  certain  terms,  which,  unexplained,  might  cause 
misapprehension.     In  the  balance  sheet  referred  to  and  illustrated 
by  a  diagram,  and  also  in  the  Private  Ledger  and  Perpetual  Bal- 
ance Sheet,  described  in  another  part  of  this  volume,  the  term  In- 
vestment Accounts  is  used  to  designate  the  accounts  with  proper- 
ties and  values  owned  by  the  business  outside  of  Merchandise,  Ma- 
terials, Notes  Receivable,  and  the  other  usual  resources  of  the  busi- 
ness.    The  investment  of  the  proprietors  or  of  the  stockholders  is, 
of  course,  the  money  put  by  them  into  the  business.     As  the  busi- 
ness proceeds,  however,  it  is  frequently  foundto  be  desirable  or  ex- 
pedient for  it  to  make  certain  disposals  of  capital  which  amount  to 
specific  investments  in  the  interest  of  the  business.     These  invest- 
ments include  such  items  as  the  store  building,  a  factory  building, 
the  machinery  and  tools  for  equipping  the  factory,  and  the  fixtures 
in  the  store  itself,  each  one  of  which  is  necessary  to  the  bdsiness. 
Accounts  representing  properties  of  this  kind,  while  being  Re- 


=~T 


lit 


ivable    Ac- 
Siocks  and 
2  Resources 
y  Accounts 
Its,  Sundry 
ts  of  Trans- 
es  of  Doing 
d  Losses  (in 
int  and  Sur- 
[,  represents 
md  the  L'a- 
ranged  in  a 
n  in  balance 
a  considera- 
et. 

ition  to  the 
might  cause 
d  illustrated 
rpetual  Bal- 
the  term  In- 
vvith  proper- 
landise,  Ma- 
s  of  the  busi- 
ckholders  is, 
As  the  busi- 
sirable  or  ex- 
;h  amount  to 
riiese  invest- 
ory  building, 
i  the  fixtures 
the  business, 
le  being  Re- 


ArcOT'XTIXO    SYSTEM  01 

•ource  Accounts,  are  yet  to  he  distinguished  from  other  accounts 
of  the  same  class,  sometimes  called  (Juick  Assets,  or  wliat  are  more 
correctly  designated  as  Available  Resources.  Again,  it  some- 
times Iwippens  that  in  the  course  of  a  business,  owned  by  partners, 
we  will  say,  there  is  accumulated  more  money  than  is  re(|uired  in 
the  business  itself,  and  which  surplus  the  partners  agree  to  put 

I*""'  FixTrnKii  DKi-RKciATiim 


Correction! 


Cr. 

Allnwiincn  for  DvpiTclnllnn 
(*«  (libil  in  Rufrvt  for 
Jnxturti  Oepreemlionj 


Cr.  Balance— Amonntprovldetl 
for  Utipruciation 


into  (iovernment  bonds  or  into  some  first  class  stock  upon  joint 
account.  Or  it  may  be  decided  to  buy  a  piece  of  real  estate.  Here, 
in  turn,  arises  the  need  of  such  a  designation  as  Investment  Ac- 
counts in  order  to  maintain  a  complete  classification.  It  is  to  be 
admitted  that  instances  of  the  kind  last  cited  are  somewhat  rare, 
and  that  at  best  it  is  inexpedient  for  partners  in  a  business  to  go 


Dr 

m 


Rehkrvr  for  Fixtubks  Dkprkciation 


Cr. 


Amount  of  RstlmattHl  Depreciation 
(Set  CrtiM  in  F.xturii  DeprtciutlOn) 


Dr.  Balance  —  Deficiency  in 
ami  lint  charged  to  Ex- 
pense. (To  be  carried  to 
LubB  and  Gain  Account) 


Amount  carried  to  proper 
Bxtwiiia  Account 


Cr.  Balanrc— Excetslve  charf;e 
to  Bxpenoe.  (To  b<?  carried 
to  Lo«8  and  Gain  Accoaot) 


very  far  outside  of  the  lines  of  that  business  with  their  investments. 
It  is  better,  as  a  rule,  to  take  such  ventures  entirely  out  of  the 
books  of  the  business.  Our  purpose,  however,  in  preparing  this 
volume  is  to  show  how  accounts  are  to  be  kept,  and  not  to  pre- 
scribe the  business  policy  nor  define  the  business  management  of 
the  men  who  are  doing  business. 


f-f'l 


TIIK    HELl' rROVINO 


Another  term  to  which  attention  should  be  directetV  in  this 
connection  is  tliat  of  Ledger.  In  this  voUime  the  word  is  used  in 
two  (hstinct  meanings,  which  always  may  be  distinguished  by  the 
context.  In  some  cases  the  word  is  employed  in  the  sense  of  a 
separate  volume,  as,  for  example,  the  Instalment  Ledger  or  the 
Mercantile  Ledger,  meaning  the  special  volume  prepared  with 


llebiitcK  nnd  Allowance* 
as  they  occur 


RiKKRVR  roil  U«HATEI»  AND  \U.nWAKiK'. 


Cr. 


Pr<)vl»l(>li  for  prohahli'  claltnt 
{Sft  iimptr  (ifl>l  among 
Kxpinit  AcfOUhli) 


Dr.  nalancc"  Dcflrlency  In  pro- 
vlfliin.  (To  bo  rarrii'd  to 
l.omt  anil  Uain  Accouni) 


Cr.  Balance  E.TPeB»lvf  pro- 
vUlon.  (To  l)c  nirrled  to 
LoM  and  (ialn  Acconnt) 


rulings  appropriate  for  its  purpose.  In  other  cases,  the  word 
Ledger  is  used  in  the  sense  of  a  certain  class  of  accounts  taken  col- 
lectively. As  thus  employed  it  may  refer  to  a  separate  volume 
wherein  the  class  of  accounts  specified  is  kept,  or  to  a  portion  of  a 
volume  set  aside  for  the  reception  of  the  accounts  of  the  class 
specified.     Thus  we  have  used  the  term  Expense  Ledger,  meaning 

Dr.  Uebeiivb  for  Bad  Dbbts 


Cr. 


Actual  LoBica  bb  they  occur 


Dr.  Balance  -  Deflclency  In 
Allowance.  (To  Im  carried 
to  LosB  and  lialn  Account) 


Allowance  for  probable  lo»«e« 
{Se»  proper  dfbit  among 
Expenat  Aceountt) 


Cr.  Balance— EicesBlve  Allow- 
ance. (To  bo  carried  to 
LoBB  and  Oaln  Account) 


collectively  all  those  accounts  into  which  the  general  expenses  of 
the  establishment  are  divided;  Purchase  Ledger,  meaning  collec- 
tively all  those  accounts  with  persons,  f^rms  and  corporations  from 
whom  the  business  buys  goods;  Sundry  Debtors'  Ledger,  meaning 
collectively  the  accounts  with  the  debtors  of  the  business,  with  the 
exception  of  those  of  certain  reserved  classes,  as,  for  example,  in 


:te(V  in  this 
d  is  used  in 
ihed  by  the 
:  sense  of  a 
Iger  or  the 
pared  with 

C"r, 

(ir  prohiilili'  clalmt 
I/Mr  <ltb'l  among 

ACfOUIlU) 


A( 'COi; XTI N( }    H YN'IK.M 


the  Imsiness  dcscriheU  ia  this  work,  the  Instahnent  Accounts  or 
Lease  Accounts, 

In  the  fornuilae  of  accounts  which  we  have  presented  on  tlicse 
pa^'cs  there  are  inchided,  in  adcHtion  to  those  whicii  are  specifically 
referred  to  in  the  text,  others  which  in  kind  are  closely  related  to 
some  of  them  and  which  are  necessary  to  a  complete  presentation 


Dr 


CorrtTtloin 


I'r.ANT  DKPiiEf  lATKiw    (Mttnufacturliig) 

•mmm 


Cr. 


Allominci'  for  Df  prerliitloii 
(.s'««  tMIt  In  Htftrvt  for 
Plant  Dtiirtviation) 


s,  the  word 
ts  taken  col- 
rate  volume 
portion  of  a 
of  the  class 
jer,  meaning 

Or. 

I  for  probnblo  lo»»c» 
roper  dfblt  among 
M  Accountf) 


to 


1  expenses  of 
aning  collec- 
Dfations  from 
ger,  meaning 
ness.  with  the 
r  example,  in 


Cr.  BiiInii<'e--Amount  provlik'd 
for  iJt'preclutiuu 


of  the  accounts  that  it  may  be  found  necessary  to  open  in  conduct- 
ing a  business  of  the  largest  and  most  extensive  character. 

The  forms  of  accounts  and  the  diagrams  are  made  so  complete 
in  themselves  as  to  be  self-explanatory,  and,  therefore,  it  is  not 
necessary  to  refer  to  them  in  detail.  The  form  of  balance  sheet 
here  given,  showing  the  accounts  arranged  as  they  would  be  at  the 

"'•  REsimyB  FOB  Plawt  DEpngciATioK    (Manufacturing)  cr. 


Amount  of  Khtlniatod  DcpnTlatlon 
(  See  Crnlit  In  Plant  iMtmciation 
Account) 


Dr.  Balnnre  —  Deficiency  In 
Amounts  charged  to  Product 
AccounlK.  ('Po  he  rarried  to 
Lobs  and  Gain  Account) 


Amounta  charged  to  Product 
Accounts 


C  '.  Balance'- Excessive  charge 
to  Product  Accounts.  (To 
be  carried  to  Loss  and  Gain 
Account) 


time  of  opening  or  closing  the  books,  is  in  some  respects  intro- 
ductory to  what  is  presented  further  on  in  this  book  in  the  chapter 
discussing  the  Private  Ledger  and  Perpetual  Balance  Sheet. 

What  we  have  for  convenience  called  in  the  Self-Proving 
Private  Ledger  and  Balance  Sheet  and  elsewhere  in  the  classifica- 
tion of  accounts  in  this  volume  Investments,  are  the  same  as  de- 


i 


i'  III 

!■       w 


'^I^J^  . 


t  ^Mf^f^M^^'lfffitfJflft' 


mw'^m'*^—  ■ 


M 


THE    SELF-PIK ) VINO 


scribed  by  some  authors  on  bookkeeping,  of  whom  may  be  men- 
tioned Thornton  and  Garcke  and  Fells,  as  Fixed  Capital.  The 
accounts  in  question  represent  property  that  remains  in  the  pos- 
session of  the  business,  considering  the  business  now  as  a  thing 
apart  from  its  owners,  and  which  is  used  in  the  business  to  help 
make  a  profit,  but  which  is  not  bought  and  sold  as  merchandise. 
The  contra  term  to  Fixed  Capital  would  be  Floating  Capital, 
which  would  include  merchandise,  something  that  is  parted  with . 
to  make  a  profit  by  changing  it  for  some  other  property.  The 
accounts  with  Fixed  Capital,  according  to  Thornton,  for  example, 
include  Machinery,  Ofifice  Furniture,  Business  Premises,  Land, 
Fixtures,  Manufacturing  Plant,  &c.  These  accounts  are  some- 
times called  Property  Accounts,  but  that  term  includes,  as  we 
have  shown  in  the  chapter  on  classification  of  accounts,  such  ac- 
counts as  Cash,  Merchandise  and  Debts.  We  have  preferred  the 
general  term  Investments  to  indicate  these  accounts. 

Accounts  with  Investments  or  accounts  with  items  of  Fixed 
Capital  naturally  divide  into  two  classes,  one  of  which  includes 
those  things  immediately  essential  to  the  business,  such  as  Manu- 
facturing Plant,  Store  Fixtures,  Office  Furniture  and  the  like,  and 
the  items  in  which  some  of  the  funds  of  the  business  are  invested, 
and  which,  in  a  sense,  constitute  the  investment  of  reserve  funds. 
We  have  called  the  first  of  these  Necessary  Investments,  and  we 
have  designated  the  second  of  these  as  Speculative  Investments, 
which  analysis  will  serve  many  purposes.  The  names,  however, 
may  be  varied,  at  the  option  of  the  accountant,  without  detri- 
ment to  the  scheme  of  the  Private  Ledger  and  Perpetual  Balance 
Sheet. 

A  word  should  be  added  with  respect  to  Reserve  Accounts 
for  Depreciation  of  Plant  and  Fixtures,  and  for  Bad  Debts  and 
the  like.  The  depreciation  of  fixtures,  machinery,  manufacturing 
plant  and  other  articles  of  property  is  something  which  should  be 


nay  be  men- 
!apital.  The 
s  in  the  poj- 
w  as  a  thing 
iness  to  help 
merchandise, 
ting  Capital, 
i  parted  with . 
operty.  The 
for  example, 
mises,  Land, 
its  are  some- 
:ludes,  as  we 
mts,  such  ac- 
preferred  the 

ems  of  Fixed 
hich  includes 
Lich  as  Manii- 
l  the  like,  and 

are  invested, 
reserve  funds, 
lents,  and  we 

Investments, 
nes,  however, 
i'ithout  detri- 
etual  Balance 

rve  Accounts 
ad  Debts  and 
nanufacturing 
lich  should  be 


l! 


ACCOUNT!  X(;    SYSTEM 


m 


considered  a  part  of  the  cost  of  doing  business,  or,  in  the  case  of 
manufacturing,  a  part  of  the  cost  of  the  goods  produced.  The 
depreciation,  therefore,  is  something  which  should  be  charged 
from  month  to  month.  While  it  would  be  sufficient  in  the  matter 
of  mere  solvency  and  in  the  proper  adjustment  of  accounts  an- 
nually to  have  a  Reserve  Account,  the  credit  balance  in  which 
derived  from  Loss  and  Gain  is  equal  to  the  depreciation,  or  the 
loss  in  the  way  of  bad  debts,  still  more  is  required  to  keep  the 
books  of  a  going  business  in  proper  condition.  It  is  necessary  for 
reasons  that  have  been  explained  to  have  the  costs  of  doing  busi- 
ness properly  charged  month  by  month,  and  in  case  of  manufac- 
turing to  be  spread  over  the  product  as  the  goods  are  produced. 
While  these  charges  thus  occur  monthly,  yet  the  depreciation  of 
the  property  is  a  matter  that  ordinarily  is  estimated  only  once  a 
year.  Provision  for  the  depreciation,  therefore,  must  be  made 
month  by  month,  even  though  the  amount  thus  accumulated  is 
only  used  once  a  year. 

Still  other  considerations  which  will  occur  to  the  experienced 
accountant  should  also  be  borne  in  mind.  Reserve  Accounts  by 
classification  are  Liability  Accounts,  and  it  is  scarcely  expedient 
to  allow  them  to  grow  to  any  considerable  sum,  simply  because 
they  add  a  fictitious  quantity  to  the  Liabilities,  offset  by  a  corre- 
sponding fictitious  amount  among  the  assets.  Some  plan,  there- 
fore, is  desirable  by  which  they  may  be  dispensed  with. 

By  opening  secondary  accounts  wherever  depreciation  in 
value  or  shrinkage  occurs,  we  are  able  to  wipe  out  the  liability, 
and  in  our  system  of  classification  perform  what  is  equivalent  to 
subtracting  the  depreciation  from  the  asset,  a  plan  very  generally 
followed  in  statements  of  affairs.  Of  the  two  accounts  thus 
brought  into  use,  one  represents  the  amount  of  the  depreciation 
itself,  and  is  located  in  the  Investment  Ledger.  The  other  repre- 
sents the  reserve  set  aside  for  depreciation,  and,  as  previously  re- 


'1  i 


R'? 


4)  ! 


i 


THE    SELF-PROVING 

w 

„ive.  from  toe  .o  t.me  .he  or  d.t   ^ha^^^a  . 
profits  of  the  business,  or,  what  is  the  same,  ere 

L  .He  amount  <-  ;s  charged  up  -—  ^   ^roU't  is 

a  part  of  the  cost  of  the  produ..    J^^^^  „,  ,,„t 

-::t:rr;reC::.°';^his^eansthe,iai,i,i. 

f;l.e.h..here.r.^^^^^^^^^^^^^ 

curs.    Inasmuch  as  the  ^^^'^^  investments  them- 

T       Tstdnao.  while  the  corresponding  Depreciation  Ac- 
shows  Its  ongmai  cost,  wm  ^^_ 

,    count  shows  what  has  been  wr,tten  off.    B>  t^.   f'^'  ;^„„,,  .„ 
plant  are  comphed  with. 


;  latter  re- 
;  from  the 
espondinji 
usiners,  or 
A-Ccount  is 
,  the  debit 
he  hability 
)n  as  it  OC-. 
dit  account 
lents  them- 
ent  Ledger 
eal  vakte  of 
accountants 
lal  Account 
eciation  Ac- 
n  all  the  re- 
reference  to 
inufacturing 


SUBDIVISIONS    OF    THE    LEDGER 

In  order  to  carry  out  in  an  efficient  manner  the  scheme  of 
classification  on  which  the  Self-Proving  Accounting  System  is 
based,  it  is  necessary  to  set  apart  separate  ledger  volumes  to  the 
diflferent  classes  of  accounts,  or  to  assign  to  each  of  the  diflferent 
classes  a  subdivision  of  a  single  volume.  Either  plan  will  answer 
so  far  as  the  essential  requirements  are  concerned,  but  a  combina- 
tion of  the  two  will  secure  the  best  results  in  most  cases.  Each 
class  of  accounts,  as  the  reader  has  perceived  in  what  has  pre- 
ceded, is  represented  by  a  collective  account  of  like  name  in  the 
Private  Ledgei.  For  purposes  of  proof,  therefore,  the  accounts 
of  each  class  should  oe  so  much  by  themselves  as  to  make  it  easy 
to  inspect  them  at  any  time,  apart  from  all  others,  as,  for  ex- 
ample, in  taking  off  a  trial  balance  or  otherwise  proving  them  by 
comparison  of  their  balances  with  the  balance  in  the  collective  ac- 
count in  the  Private  Ledger.  It  becomes  a  matter  of  consider- 
able importance,  therefore,  to  the  bookkeeper  to  determine  just 
where  to  locate  a  given  class  of  accounts. 

Certain  accounts,  by  their  nature,  are  best  accommodated 
by  a  ledger  ruled  in  one  special  manner,  while  certain  other  ac- 
counts are  best  accommodated  by  ledgers  constructed  upon  a 
different  principle.  Individual  tastes  will  also  differ  in  matters 
of  this  kind,  for  no  two  business  establishments  can  be  satisfac- 
torily managed  upon  exactly  the  same  lines— at  least,  according 
to  the  notions  of  their  respective  proprietors.  Our  directions  in 
this  regard,  therefore,  are  expressed  in  the  most  general  terms. 


t 


}l    : 


1 


it 


t1 


mm 


THE    SELF-rUOVING 

*c    nr  Sales  Accounts  as  they  are 
For  Customers'  Account     o    Sa  -  '^  establishment. 

„ec„ent,y  caUed.  in  a  --"'    J^™  f;  easoLb.e  degree  o, 
wherein  charges  and  ered.ts  ""^^  ^  ^^^^^.^   ,„,  ,,,,ich 

regularity  month  after  -"  '•;-^^^^';  /„„  ,„,„  „,  ledger  that 
monthly  statements  are  «"'"=«''• 'fIVself-Proving  Mercantile 
has  proven  so  satisfactory  m  "-.-;';' ^;';J,  „,'„,,  ,o,„n,e. 
Ledger,  illustrated  in  '-^-f  .■"  ^r'!,"  ^  .he  special  form 
For  accounts  payable  upon  the  -"—  fj_^  ^  ,  J„,„  ,,  ,he 
o,  ledger  illustrated  in  fac-s,nnle  -" J^^  J*'";   ^^^  „,  ,„y.„i,,g 
Sell-Proving  Instalment  Ledger,  .s  the  best 
that  has  been  Revised.  ^^^^^^  ^^^  ,^^  Self-Prov- 

Both  the  Self-Provmg  .|^ed  as  ledger  mach.nes, 

i„,  instalment  Ledger  -^  ^^''^j:;'!,  ever  keeping  before 
grinding  out  balances  month  by  m""'"  .,,„„  „(  ,i,e 

L  attention  o,  the  '^^^^Z^c.  at  successive 
— n:  oC trorCrs  the  same  advantages  in  use 

'""fo?;"' Accounts,  where  a  -i-ab.  — 

,ems  occur  each  -'^^f  "--rtrsaXnera,  form 
note  are  made  qu.te  "^J^'  ;;J;',\erewUh.  may  be  employed. 
,,  .he  Mercantde  Led  -^^^^^^^^^^^^^  .^^  ^^  .^  ^^^  establishments 
Indeed,  such  I'd^ers  are  f  P,^  establishments,  however, 

with  most  satisfactory  results.  ^^  „^^ 

prefer  for  Purchase  A-^'''^''^^"  t  s  de     ibe'  and  illustrated 
Balance  column  l.dge.  ^  -ch^  ^  ^  ^^^„_  ^^  .„  ,,  , 

rrgroH— nces,  including  the  booUUeepefs  prefer- 

e"'^^^-  T    A  .r  hv  reason  of  its  form,  is.preferred 

^  Balance  ^^^^^^^^^^^^  service  in  any  system 

by  many  accountants  for  a  very  ^^^^^^^  ^^ 

with  which  it  may  be  employed.  The  Balanc 


*^' 


3  they  are 
iblishment, 

degree  of 

for  \vhich 
ledger  that 
Mercantile 
his  volume, 
ipecial  form 
nown  as  the 
of  anything 

le  Self-Prov- 
;r  machines, 
eping  before 
dition  of  the 
at  successive 
ntages  in  use 

le  number  of 
ettlements  by 
;  general  form 
be  employed, 
establishments 
jnts,  however, 
r  known  as  the 
and  illustrated 
,  to  be  made  in 
:eeper's  prefer- 

rm,  is.preferred 
;  in  any  system 
umn  Ledger,  to 


ACCOrXTIX(S    SYSTEM 


0!) 


this  end,  may  be  bound  in  several  separate  volumes,  each  allotted 
to  a  class  of  accounts,  or  in  one  large  volume,  subdivided  by  col- 
ored leaves,  inserted  at  different  points,  in  a  way  to  allot  different 
sections  to  the  different  classes  of  accounts. 

Whether  in  separate  volumes  or  in  a  single  volume,  divided 
as  last  mentioned,  the  Balance  Column  Ledger  is  found  very  sat- 
isfactory for  use  for  Purchase  Accounts,  Expense  Accounts, 
Manufacturing  Accounts,  Investment  Accounts,  Sundry  Debt- 
ors' Accounts,  Sundry  Creditors'  Accounts,  Reserve  Funds  Ac- 
counts, and  all  Loss  and  Gain  Accounts.  It  readily  lends  itself 
to  any  subdivision  of  classification  that  may  be  desired.  In 
another  place  we  describe  a  combined  Expense  Record  and 
Ledger,  which  has  been  found  useful  in  many  directions  for  the 
Expense  Accounts  of  a  business,  where  the  latter  are  several  in 
numl)er,  with  numerous  cash  items  occurring.  Still  other  special 
ledgers  might  be  en-merated. 

The  points  to  be  considered  in  arranging  the  ledgers  in  a 
given  system  of  bookkeeping  include  the  expense  in  time  and  care 
of  columns  in  the  posting  mediums  for  condensing  or  consolidat- 
ing the  items,  and  the  labor  of  posting  to  separate  accounts. 
Thus,  in  discussing  the  question  of  the  employment  of  the  com- 
bined Expense  Record  and  Ledger,  or  some  other  special  book 
for  a  set  of  accounts,  as  contrasted  with  using  a  section  of  the 
Balance  Column  Ledger  for  the  same  accounts,  posting  direct, 
attention  must  be  given  to  such  details  as  the  footing  of  the  col- 
umns in  the  combined  form,  compared  with  the  labor  of  posting 
individual  items  to  regular  ledger  accounts.  The  columnar  sys- 
tem is  a  great  labor  saver  in  many  cases,  and  yet,  as  all  experi- 
enced bookkeepers  know,  it  can  be  carried  to  extremes,  and,  by 
the  very  effort  to  utilize  it,  made  into  a  labor  producer. 

What  the  bookkeeper  should  do  at  the  outset,  in  the  matter 
of  arranging  his  accounts  with  respect  to  the  different  ledgers,  is 


1 . 


•V: 


n 


THE    SBLF-rROViNG 


o,  the  business,  and  then  to  P-P^^f^f ;;:^,.  „,  should 
particular  led.er  »  .'---;;,  .^  X,  thus  gua.din, 
keep  the  diagram  always  '=='°':'  "  "  '  „^^„,  („  distributing 

against  a  Cass  o.  f "  -/'[^j'    ^  ^'"X.  growing  out  o, 
—  ::e:a"tT:--Wfa.ven  account  has  been 

established.  ._^  ^j_.^  connection,  show- 

ing  across  the  top  the  leog  ^  ^^^^  principal 

ness  n,ay  be  divided,  and  down  the  »'<1= ''^  ";  ^^^^,  i„ 

ledger  in  the  books  of  the  business. 


!  t 


the  needs 
ig  in  what 
He  should 
5  guarding 
istributing 
zing  out  of 
it  has  been 

;tion,  show- 
is  of  a  busi- 
he  principal 
rk  shows  in 
liagram  also 
Ledger  and 
isions  of  the 


ACCOUNTING    SYSTEM 


71 


A4v«rtising 

Bank 

'Bonds 

Bonds  Rttult* 

Buylrg 

Clipltal 

Carfart  and  Uatianfir 

Cartaga  and  atoraga 

Calh 

Contlngani!;  Accta.   (Bad  Dabta,  Racataa,  a 

Countlra  and  Shelvlna 

Cradltors   (Purohaiea) 

Crtdltori   (Sundry) 

'Dablora   llnalalaant) 

Sabtora    (Cpan  Account] 

Dapraolatlon  Acota.   (Machlnarj,  Flant,  at 

Dlvldanda  and  Dlvialona 

Enployaa'  Aocounta 

Ixpanaa  Ladiar 

Paotory  Plxturaa 

rtxad  Chargaa  (Vanufaoturlng) 

Tual  and  Light 

Oaa  Plxturaa 

laattng  Aaparatua 

laDalmnt  and  Surplua 

Inatalawnt  Ladgar 

Xnsuranoa  and  Taxaa 

Zntaraat  and  Dlacount 

Invaatoant  Ladgar 

Labor  (Manufaoturlng) 

Legal  Eapanaa 

Loaa  and  Oaln  Ladgar 

Manufacturing  lapansal 

Manufacturing  Ladgar 

Manufacturing  Plant 

Matarlala  . 

Mtrobandlaa  (Saa  Buying  and  Balling) 

Marchandlaa  Loaa  and  Qaln 

■laaallanaoua  Loaa  and  Oaln 

Notts  rayabl*  , 

Mot«a  Rasalvabl* 

Offlca  Pumltur» 

Officers  (of  Corporation} 

Eroperty  (Sea  Baal  Batata) 

Proprietora     Buying  Account 

Proprietors'  Drawing  Account 

Purchaaa  Ladgar 

Rtal  Batata 

Real  Estate  Reaulta 

Rebatea  and  Alloaancaa 

Rent 

Repairs  and  Breakage 

Reserve  Funds  Ledger 

Reaerva  for  Bad  Debts 

Reeerve  for  Rebatea  and  Allovanees 

Ressrve  for  Depreciation  of  Store  Plant 

Raaarva  for  Depreciation  of  Mfg<  Plant 

galling 

Btstionai'y  aod  Suppllat 

Stockholdara'  Accounts 

Stocks  (Sharts  ta.Corporgtlora) 

eton  Plant 

Sundry  Crsditora'  Lsdgtr 

Sundry  Debtor*'  Ladgar 

Sttapended  List 

Telegraph  and  Talaphon* 

Unclassified  Ispenses 

■•gss  and  talarlas 


c.) 


• 
• 

/ 


/ 


v' 


n 


DIAGRAM  OF  UEDQER  SUBDIVISIONS  FOR  AN  INSTALMENT  BUSINESS 


li 


MERCHANDISE   ACCOUNT 
In  the  Self-FrovinK  Accoun.inR  Sy.te,,,  the  Merchandise 
Acconn..  where  a  strie.ly  trading  hu.iness  i.  -°f^^'fZ^_ 
videcl  into  two  parts,  designated  as  Bny.ng  and  Selhng  r  spec 
,„lv.     Where  a  n.ann.aetnring  departn.en,  is  conducted  ,n  con- 
nection with  the  trading  department  stiU  another  ^^'-^^^Z 
Merchandise  Accotmt  is  made,  called  Manufactnr.ng.    In  order  to 
„:  the  relationship  o,  each  o,  these  to  the  others  ..may    e     - 
marked  that  Buying  and  Manuiactnnng  are  --<;' J    ^^^^^^^^^^^ 
of  the  Merchandise  Account  as  ordinardy  con.U.cted.  uh,k  Selhng 

store  or  warehouse.  ,    i       „^  ^^r. 

As  sales  are  made  two  sets  ol  prices  are  »""f  Velng 
resenting  the  cos.  of  the  articles  sent  out  and  the  other  the  selhng 
fi^^^  es.  From  time  to  time-either  d,ily,  weekly  or  mon  hly 
as  may  be  the  preference  of  the  manager-the  cost  amounts  of  the 
gords'sold  ar^  footed  and  Selling  Account  is  dehite  w.th  he 
amount  and  Bttying  Account  credited.  By  th.s  step  t wo  hmg 
are  accomplished.     Having   credited   Buying   Account   at    cos. 


t*jrf)S»«  -    " 


jrchandise  . 
ted.  is  cli- 
ng respec- 
:ed  in  con- 
iion  of  the 
[n  order  to 
may  be  re- 
the  debits 
hile  Selling 
;ed. 

ods  as  they 
cartage  on 
edited  with 
tions  in  in- 
goods  pur- 
time  shows 
rered  at  the 

d — one  rep- 
:r  the  selling 
or  monthly, 
lounts  of  the 
ed  with  the 
3  two  things 
unt   at   cost 


ACCOUXTIXO    SYSTKM 


m 


prices  with  the  goods  disposed  of,  the  balance  in  Buying  Account 
represents  the  goods  on  hand — in  other  words,  the  inventory.  In 
the  second  place,  debiting  Selling  Account  at  cost  prices  with  the 
goods  sold,  and  then  in  regular  course  crediting  Selling  Account 
with  the  goods  sent  out  at  selling  prices,  causes  that  account  by  its 
balance  to  show  the  gross  profit  (or  loss). 

Debit  and  credit  columns  in  Selling  Account  are  useful,  not 
only  for  the  reason  last  explahied.  but  because  in  this  account,  as 
well  as  in  Buying  Account,  corrections,  deductions  and  allow- 
ances are  sometimes  made,  and  also  because  occasionally  goods 
arc  returned  by  customers.  By  arranging  the  items  as  above  de- 
scribed every  provision  is  made  for  the  requirements  that  arise, 
with  the  result  that  the  balance  in  Selling  Account  always  shows 
gross  profits  (or  losses)  as  they  occur. 

Manufacturing  Account,  which  for  present  purposes  is  to  be 
regarded  as  a  subdivision  of  Merchandise  Account,  may  be  con- 
ducted as  a  single  account,  to  be  debited  with  all  the  costs,  includ- 
ing materials,  labor,  superintendence,  rent,  power,  insurance,  de- 
preciation of  machinery,  etc.,  and  credited  with  goods  produced, 
at  cost  prices.  The  debit  side  of  Manufacturing  Account  then 
shows  cost  and  the  credit  side  product.  Where,  for  statistical 
purposes,  it  is  desired  to  subdivide  Manufacturing  Account,  it 
may  be  done  to  whatever  extent  is  required.  The  goods  produced 
in  the  manufacturing  department  are  to  be  taken  over  by  the  Buy- 
ing Account  at  cost  prices,  the  same  as  though  the  goods  were 
bought  from  some  one  else.  Manufacturing  Account  then  makes 
the  goods  and  shows  their  cost,  Buying  Account  carries  the  goods 
and  shows  at  all  times  the  amount  on  hand,  while  Selling  Account 
disposes  of  the  goods  and  shows  the  profit  or  loss  that  is  made 
upon  them. 


HHiilii 


KWWI1  liitiiiiiiiiiiiyi 


■  i^ 


l^IANUFACTURING 

We  have  briefly  treated  of  ManufaOuring  Account  as  a  sub- 
division of  Merchandise  Account,  not  only  in  the  chapter  referring 
to  Merchandise  Account,  but  also  in  the  chapter  treating  of  the 
Classification  of  Accounts.     In  a  trading  or  merchandising  busi- 
ness, such  as  an  instalment  business  usually  is,  Manufactunng  is 
only  a  subordinate  division,  and  yet  it  frequently  extends  into  di- 
mensions that  render  its  correct  treatment  in  the  accounts  of  the 
concern  a  matter  of  great  importance.     Even  in  those  cases  where 
the  purpose  of  the  management  is  to  conduct  a  strictly  merchan- 
dising business,  it  is  found  necessary  to  maintain  at  least  a  repair- 
ing department  for  the  prompt  and  economical  restoration  of 
damaged  goods   and  also  for  the  accommodation  of  customers. 
The  repairing  department  is,  in  effect,  a  manufacturing  depart- 
ment, and  when  it  is  once  organized  there  is  but  a  step  more  re- 
quired to  produce  in  it  some  of  the  goods  which  the  establishment 
has  been  buying  outside.     It  is  important,  therefore,  in  this  pres- 
entation of  accounts,  that  brief  space  at  least  be  given  to  the  prin- 
ciples underlying  the  conduct  of  a  Manufacturing  Account,  leav- 
ing to  another  volume  a  complete  exposition  of  the  application  of 
the  Self-Proving  Accounting  System  to  a  large  manufactunng 

business. 

In  another  chapter  we  discuss  Repairing  and  Jobbing. 

showing  how  the  small  manufacturing  department,  which  it  is 
necessary  to  maintain  simply  for  repairs  to  goods  and  accommo- 
dation to  customers,  in  connection  with  almost  every  instalment 


t  as  a  sub- . 
;r  referring 
:ing  of  the 
lising  busj- 
acturing  is 
ids  into  di- 
nnts  of  the 
:ases  where 
y  merchan- 
ist  a  repair- 
toration  of 
customers, 
ing  depart- 
ep  more  re- 
tablishtnent 
in  this  pres- 
to the  prin- 
xount,  leav- 
pplication  of 
anufacturing 

and  Jobbing. 
,  which  it  is 
id  accommo- 
ry  instahnent 


ACCOUNTING    SYSTEM 


75 


Store,  may  be  conducted  through  the  medium  of  the  Expense  Ac- 
counts of  the  business.  This  plan  of  luanageinent  meets  a  cer- 
tain class  of  requirements  vvitli  fairly  satisfactory  results.  The 
two  points  on  which  we  shall  speak  in  this  chapter  are,  first,  the 
management  of  the  accounts  of  a  complete  manufacturing  depart- 
ment which  is  relatively  small  and  therefore  only  a  subordinate 
division  of  a  merchandising  business,  and  wherein  the  goods  pro- 
duced are  sold  entirely  at  retail  in  the  other  departments  of  the 
business,  and,  second,  the  conduct  of  the  accounts  of  a  manufact- 
uring department  which,  while  being  the  adjunct  of  a  merchan- 
dising business,  has  grown  to  large  dimensions,  with  a  considerable 
share  of  its  output  sold  in  a  wholesale  way  to  other  retailers.  We 
shall  not  attempt  to  be  exhaustive  on  either  of  these  subjects,  for, 
as  before  mentioned,  their  complete  treatment  demands  a  separate 
volume. 

The  only  object  which  a  merchant  can  have  in  view  in  organ- 
izing a  manufacturing  department  in  connection  with  his  regular 
business  is  to  produce  goods  more  cheaply  than  they  can  be 
bought.  If  he  could  buy  like  quality,  style,  character  and  finish 
more  cheaply  than  he  could  make  them,  or  even  as  cheaply,  he 
would  be  very  foolish  to  enter  upon  manufacturing  at  all.  He 
should  have  good  and  sufficient  reasons  for  investing  money  in  a 
manufacturing  plant  and  in  undertaking  the  care  and  supervision 
of  a  department  which  at  best  may  be  depended  upon  to  make 
heavy  drafts  upon  him  in  this  regard. 

With  this  proposition,  therefore,  as  a  basis  that  the  goods 
produced  either  must  be  cheaper  for  like  quality  or  better  at  the 
same  cost  than  could  be  bought  in  the  market,  it  is  evident  that 
the  operations  of  the  manufacturing  department  of  a  trading  en- 
terprise should  be  conducted  in  all  respects  in  a  way  to  produce 
goods  at  the  lowest  possible  price  consistent  with  quality,  and 
that  the  accounts  should  be  conducted  simply  to  show  costs  and 


■■■;.^^»Mi*WBHe*^'-"^"' 


n 


'I'lIK    HKI.K  riloVINU 


1 


not  to  look  after  tlic  profits  that  follow  upon  sclhnK.       I  hey 
should  be  so  arranged  as  to  show  the  net  cost  of  each  article  pro- 
duced, and  the  cost  prices  from  time  to  time  should  be  compared 
with  the  prices  that  it  would  be  necessary  to  pay  for  the  same 
goods  if  bought  from  other  manufacturers.     The  profit  on  goods 
n,a,u,factured.  as  well  as  on  those  bought,  belongs  to  the  sales 
department,  and  therefore,  as  produced,  the  goods  are  to  be  trans- 
ferred  from  the  Manufacturing  Account  to  the  Huyuig  Account.  • 
The  mamifacturing  department  should  not  carry  any  stocU  of 
goo.ls  on  hand,  so  far  at  least  as  its  accounts  are  concerned.      1  he 
carrying  of  stock  belongs  to  the  Buying  Account,  as  we  have 
elsewhere  explained,  and  this  rule  should  apply  the  same  where 
goods  are  made  as  where  they  are  bought.     The  finished  goods 
as  thev  are  produced  should  be  taken  out  of  the  accounts  repre- 
senting the  manufacturing  department  and  transferred  to  the 
Ruving  Account.     The  necessary  steps  for  accom,)lishmg  these 
ends  may  be  features  of  bookkeeping  only,  but  in  the  manage- 
ment of  the  accounts  they  are  important  matters,  and  whether 
as  a  fact  the  goods  change  position  or  not  the  records  should  be 
managed  upon  the  plan  here  laid  down. 

So  far  as  specimen  accounts  are  concerned,  Manufacturmg. 
in  the  illustration  presented  in  this  volume,  is  represented  as  a 
single  account  to  be  debited  with  all  the  costs  that  enter  into  the 
goods  produced,  including  material,  labor,  superintendence,  rent, 
power,  fuel,  light  and  the  hundred  and  one  other  items  of  expense, 
and  to  be  credited  with  the  goods  produced  at  actual  cost,  m  a 
way  to  close  the  account.  The  balance  in  Manufacturmg  Ac- 
count, if  a  balance  ever  is  shown,  would  represent  the  material  on 
hand  unconsumed  or  goods  in  process  of  construction  and  not  yet 

charged  ofif . 

It  must  be  evident  to  every  bookkeeper,  however,  that  Man- 
ufacturing Account  may  be  subdivided  to  whatever  extent  is  de- 


ACCOUNTINU   8Y8TKM 


rt 


{T.      Tliey 
rtiole  pro- 
C(Mii  pared 
the  same 
t  on  jToocls 
)  the  sales 
o  be  trans- 
r  Account.  ■ 
y   stock   of 
ncd.     'Ihe 
is  we  have 
ame  where 
jhcd  goods 
unts  repre- 
red  to  the 
,hing  these 
le  nianage- 
iid  whether 
s  should  be 

uifacturing. 
sented  as  a 
Iter  into  the 
dence,  rent, 
;  of  expense, 
al  cost,  in  a 
cturing  Ac- 
:  material  on 
and  not  yet 

r,  that  Man- 
extent  is  de- 


sired. A  separate  account,  for  example,  may  l)c  opened  with  Ma- 
terials, or  with  each  of  several  dilTercnt  kinds  of  materials  A  such 
separate  accounts  are  desired  by  reason  of  their  statistical  value. 
A  separate  account  may  also  be  opened  with  Labor,  and  another 
with  Superintendence.  Rent,  Power  and  other  general  expenses 
which  have  to  be  spread  over  the  product  in  dctcrnMning  the  cost. 
Each  of  these  accounts,  however,  would  be  conducted  up(m  the 
same  plan  as  the  single  account,  so  far  as  it  has  been  described  in 
the  pages  preceding;  and  where  several  accounts  are  employed 
they  are  summarized  or  totaled  in  a  single  account  called  Manu- 
facturing Account,  upon  the  principle  underlying  the  group  ac- 
counts, as  described  in  the  chapter  on  Classification  of  Accounts. 

The  subdivisions  of  Manufacturing  Account  so  far  men- 
tioned are  really  subdivisions  of  the  debt  or  cost  side  of  that  ac- 
count. It  is  possible,  also,  and  very  desirable  in  many  cases,  to 
have  subdivisions  on  the  credit  or  product  side.  The  Cost  Ac- 
counts would,  of  course,  require  a  debit  and  a  credit  in  each  for 
proper  management,  and  the  Product  Accounts  likewise  require  a 
debit  and  a  credit  side  for  their  conduct. 

The  requirement  in  every  manufacturing  business  is  to  know 
the  cost,  not  only  of  each  lot  of  goods  that  is  produced,  but  also 
of  each  individual  article,  thereby  determining  the  figure  at  which 
it  can  be  sold.  It  is  recommended,  therefore,  in  order  to  keep 
track  of  individual  articles,  that  an  order  number  be  given  to  each 
lot  of  goods  taken  out,  and  that  an  account  be  opened  with  each 
order,  using  the  number  for  the  name  of  the  account,  qualified,  if 
the  same  is  deemed  expedient,  by  a  designation  of  the  kind  of 
goods.  Thus,  order  No.  99  might  represent  500  chairs  of  a  cer- 
tain description.  As  the  work  progresses  this  order  No.  99  will 
be  debited  with  the  cost  of  the  material  used  and  also  with  the 
amount  of  labor  expended  and  all  other  items  of  direct  expense. 
Finally,  a  certain  amount,  determined  by  percentage  or  otherwise, 


1    i 


i 


78 


THE    SELF-PROVIXG 


as  we  shall  discuss  further  along,'  is  to  be  added  to  the  cost  items 
for  the  general  expenses,  in  order  that  this  particular  lot  of  goods 
shall  stand  its  proper  share  of  the  cost  of  running  the  department. 

If  the  cost  items  have  been  correctly  kept  and  posted  to  the 
debi*-  of  order  No.  99,  then  their  aggregate  amount  will  represent 
the  cost  of  the  500  chairs,  and  this  is  the  amount  that  is  to  be 
charged  to  Buying  Account  and  credited  to  Manufacturing  Ac- 
count when  the  goods  are  transferred  from  the  manufacturing 
department  to  the  sa|es  department.  The  cost  items  as  they  are 
charged  to  order  No.  99  are  credited  to  the  several  accounts  rep- 
resenting Materials,  Labor,  General  Expense,  &c. 

This  brief  outline  is  sufficient  to  show  the  general  course  to 
be  pursued  in  the  conduct  of  the  accounts  of  a  manufacturing  de- 
partment, and  there  only  remains  in  this  division  of  the  subject  a 
brief  consideration  of  the  methods  to  be  followed  in  order  to  secure 
a  proper  spreading  over  the  goods  produced  of  the  general  ex- 
penses already  referred  to.  These  general  expenses  may  be  best 
apportioned,  perhaps,  by  way  of  percentage,  and  yet  there  are  ob- 
jections to  this  plan,  in  special  cases  at  least,  and  therefore  no  arbi- 
trary rule  can  be  laid  down  in  this  regard.  The  percentage  plan 
is  most  commonly  employed,  and  therefore  is  the  one  to  which 
we  shall  give  attention. 

The  rate  of  percentage  is  to  be  determined  by  the  records  of 
the  previous  year,  and  in  the  absence  of  previous  experience  must 
be  based  upon  the  best  estimate  that  can  be  made  of  the  opera- 
tions of  the  current  year.  The  foundation  on  which  the  percent- 
age is  based  is  a  m'vtter  of  considerable  importance.  In  some  es- 
tablishments it  is  taken  on  the  total  amount  of  materials  pur- 
chased. The  objection  to  this  is  that  the  prices  of  materials  of 
almost  all  kinds  vary  so  much  from  time  to  time  that  there  may 
be  some  thousands  of  dollars'  difference  between  the  cost  of  a 
given  amount  of  material  this  "year  and  the  cost  of  the  same 


.^^VMVVJfn-^Si 


"'T!^  r,  »i|)ttaUi>i1*^^4 


e  cost  items 
lot  of  goods 
departmen*. 
osted  to  the 
ill  represent 
hat  is  to  be 
icturing  Ac- 
inufacturing 
s  as  they  are 
ccounts  rep- 

ral  course  to 
facturing  de- 
the  subject  a 
der  to  secure 
;  general  ex- 
may  be  best 
there  are  ob- 
efore  no  arbi- 
rcentage  plan 
one  to  which 

the  records  of 
perience  must 
of  the  opera- 
1  the  percent- 
In  some  es- 
naterials  pur- 
)f  materials  of 
hat  there  may 
the  cost  of  a 
t  of  the  same 


ACCOUNTING    SYSTEM 


n 


amount  of  material  last  year.  With  fluctuations  of  considerable 
amount  between  any  two  years,  the  percentage,  of  course,  would 
be  wrong  or  very  misleading.  In  other  establishments  the  per- 
centage is  based  upon  the  total  output,  comparing  the  total  of 
general  expenses  with  the  total  amount  of  goods  produced. 
Practically  the  same  objection  prevails  in  this  case  as  in  the 
former,  because  a  part  of  the  output  is  represented  by  the  mate- 
rials consumed,  and,  as  we  have  pointed  out,  these  may  have 
varied  greatly  in  price  between  last  year  and  the  present  time.  It 
is  not  satisfactory,  either,  to  base  the  percentage  upon  the  goods 
produced,  taken  at  selling  prices,  because  those  figures  are  always 
in  a  sense  speculative  in  character,  and  vary  considerably  from 
time  to  time.  ConditioiiS  of  the  market  are  such  that  goods  are 
sometimes  sold  at  no  profit  at  all,  or  even  below  cost,  while  at 
other  times,  by  reason  of  a  favorable  turn,  the  price  is  very  much 
inflated. 

The  best  experience  of  leading  manufacturers  has  demon- 
strated the  fact  that  of  all  the  elements  entering  into  a  manufact- 
uring business  which  are  possible  to  use  as  the  basis  of  a  percent- 
age for  spreading  costs  of  general  expense,  there  is  nothing  that 
varies  less  frequently,  or  in  so  small  an  amount  one  year  compared 
with  another,  as  labor.  The  total  amount  paid  for  labor  from 
year  to  year,  the  same  number  and  general  grade  of  men  being 
employed,  varies  less  than  any  other  item  of  expenditure,  and 
therefore  the  Labor  Account  is  deemed  the  best  for  use  as  a  foun- 
dation on  which  to  base  the  percentage  covering  general  ex- 
penses. 

Suppose,  for  example,  that  the  total  cost  of  rent,  power,  in- 
surance, watchmen,  superintendenc,  time  clerk,  and  all  other 
items  of  expense  that  are  impossible  to  apportion  and  charge  spe- 
cili-ally  to  the  goods  produced,  amount  in  a  certain  manufactur- 
ing department  to  $5,000  a  year;  and  suppose,  further,  that  the 


.^iftVtiiiwimu.g 


80 


THE    SEIiF-rROVIXG 


pay-roll  amounts  for  the  same  year  to  $25,000,  and  that  this,  in 
the  estimation  of  the  managers  of  the  estabUshment,  is  about  the 
ratio  of  these  items  at  the  present  time.     How  shall  the  costs  c^ 
a  given  lot  of  goods  in  matter  of  general  expense  be  ascertained? 
Referring  now  to  the  example  above  mentioned,  order  No.  99  tor 
500  chairs,  let  it  be  assumed  that  all  the  tangible  items  of  cost 
have  been  charged  to  the  order,  including  materials,  labor,  etc., 
and  that  the  only  thing  to  be  added  is  the  allowance  for  the  gen- , 
eral  expense  of  the  establishment.     Suppose,  for  the  sake  of  illus- 
tration, that  the  item  of  labor  upon  the  order  in  question  amounts 
to  $100.     The  percentage  of  dead  expenses  determined  by  the 
figures  above  presented   during  the  past  year  was  20  per  cent- 
that  is,  the  dead  expenses  cost  one-f^fth  as  much  as  the  amount  of 
the  pay-roll.     We  therefore  add  arbitrarily  to  the  items  of  cost 
shown  by  order  No.  99-  an  amount  equal  to  one-lifth,  or  20  per 
cent.,  of  the  amount  of  labor  which  is  shown  to  have  gone  into 

that  order,  or  $20. 

This  presentation  of  a  Cost  Account  method  is  in  mere  out- 
line, and  we  purposely  omit  all  consideration  of  methods  to  be 
used  where  the  volume  of  business  greatly  varies  from  time  to  time 
without  corresponding  changes  in  amount  of  dead  or  general  ex- 
penses, because  their  complete  presentation  would  occupy  more 
space  than  can  be  spared  to  the  subject,  and  because  nothing  short 
of  a  full  discussion  would  add  anything  of  practical  value  to  the 
merchant  who  starts  a  manufacturing  department  as  a  division  of 

his  general  business. 

By  the  plan  of  keeping  the  accounts  here  shown  Labor  Ac- 
count would  be  debited  from  week  to  week  with  all  the  labor  paid. 
In  turn,  it  would  be  credited  with  the  amount  of  labor  appHed  to 
each  order,  as  the  orders  passed  through  the  factory.  If  the  ac- 
counts are  p.operly  kept,  all  the  labor  will  have  been  taken  out  of 
Labor  Account  at  the  end  of  the  year  and  charged  to  the  several 


wmmmm 


»iw-X69W;/-f ;'S*^8i«aSte<'  '■- 


ACCOUNTING    SYSTEM 


81 


at  this,  in 
about  the 
le  costs  c1 
certained? 
No.  99  for 
ms  of  cost 
labor,  etc., 
)!•  the  gen- . 
ke  of  illus- 
m  amounts 
led  by  the 
per  cent — 
amount  of 
;ms  of  cost 
,  or  20  per 
;  gone  into 

1  mere  out- 
hods  to  be 
ime  to  time 
general  ex- 
:cupy  more 
(thing  short 
^alue  to  the 
I  division  of 

Labor  Ac- 
i  labor  paid, 
ir  appHed  to 
If  the  ac- 
taken  out  of 
)  the  several 


Order  Accpimts.     Labor  Account,  accordingly,  will  close  even. 

In  the  same  way,  erch  kind  of  material  is  charged  to  its  own 
proper  account  when  it  is  bought,  and  as  portions  are  used,  the 
proper  account  is  credited  and  the  Individual  Order  Account  is 
debited.  Each  Material  Account,  therefore,  at  the  end  of  the 
year,  or  whenever  the  books  are  to  be  closed,  should  show  by  its 
balance  only  the  amount  of  material  on  hand,  or  the  inventory. 
The  correctness  of  the  accounting  will  be  demonstrated  by  a  com- 
parision  of  the  actual  inventory  with  the  balance  that  the  accoimt 
calls  for. 

The  General  Expense  Account,  by  whatever  name  it  may  be 
called,  is  debited  as  the  costs  are  made,  including  all  such  items  as 
superintendence,  insurance,  watchmen,  time  clerk,  and  all  those 
expenses  which  cannot  be  properly  apportioned  among  the  orders. 
From  time  to  time,  as  the  orders  are  completed  and  charged  up, 
this  account  is  credited  with  the  amounts  charged  to  the  indi- 
vidual orders  as  determined  by  the  percentage  established.  In 
the  illustration  above  presented,  the  General  Expense  Account 
would  be  credited  $20  at  the  time  that  order  No.  99  was  debited 
with  $20.  If  the  percentage  employed  is  correst,  then  at  the  end 
of  the  year,  or  whenever  the  books  are  closed,  the  credits  to  this 
account  will  offset  the  debits. 

There  should  be  no  balance  in  the  General  Expense  Account 
at  the  end  of  the  year,  for  all  of  the  expenses  which  it  represents 
should  have  been  apportioned  among  the  Order  Accounts  in  the 
way  above  described.  If,  however,  by  superior  economy  and  close 
management,  the  general  or  dead  expenses  of  the  manufacturing 
department  for  the  current  year  have  been  made  less  than  for  the 
preceding  year,  and  the  order  charges,  as  they  have  been  made, 
have  still  been  based  upon  the  record  of  the  preceding  year,  then 
this  account  may  show  a  credit  balance  at  closing,  which,  of 
course,  must  be  disposed  of  through  the  Loss  and  Gain  Account 


u— 


ittHiliii 


grr 


82 


THE    SELF-rROVIXG 


in  the  usual  manner.  On  the  other  hand,  if  the  expenses  rela- 
tively have  been  higher  the  present  year  than  for  the  preceding 
year,  and  the  charges  to  the  orders  nevertheless  have  been  based 
upon  the  ratio  determined  by  the  preceding  year,  then  this  ac- 
count will  show  a  debit  balance,  which,  of  course,  under  the  cir- 
cumstances, can  only  be  disposed  of  through  the  Loss  and  Gain 
Account. 

One  special  item  of  cost  that  is  very  commonly  lost  sight  of 
in  Manufacturing  Accounts  is  that  of  depreciation  of  plant.  It 
ccsts,  we  will  say  for  example,  $10,000  to  fit  up  a  factory.  This 
$10,000  is  expended  before  a  wheel  is  turned  or  a  dollar's  worth 
of  goods  produced.  At  the  end  of  the  yv=!ar  how  much  is  the  equip- 
ment worth?  In  a  practical  way  it  wiil  be  answered  that  it  is 
worth  what  it  cost.  An  argument  in  support  of  this  is  that  it 
would  cost  just  as  much  to  equip  anew.  Nevertheless,  the  saga- 
cious business  man  will  say  that  something  must  be  written  off  for 
depreciation.  Not  only  should  something  be  written  off  for  de- 
preciation in  the  sense  of  wear  and  tear,  but  still  other  considera- 
tions should  not  be  overlooked.  Machinery,  of  course,  wears  out, 
but  in  this  age  of  rapid  progress,  various  kinds  of  machines  are 
frequently  superseded  by  improved  devices  long  before  they  are 
worn  enough  to  be  greatly  hurt,  and  therefore  the  real  life  of  some 
machines  is  much  less  than  the  term  determined  by  their  wear 
alone. 

Certain  facilities  necessary  to  a  factory  are  worth  absolutely 
nothing  when  it  comes  to  a  question  of  removal,  abandonment,  or 
change  of  any  kind.  Among  these  may  be  mentioned'  shelving, 
partitions,  bins  and  woodwork  in  general.  Items  of  this  sort  are 
expensive  in  their  first  cost,  but,  for  the  reasons  above  explained, 
depreciate  very  rapidly  after  once  in  place.  On  the  other  hand, 
certain  standard  and  staple  machines  are  used  year  after  year  with- 
out perceptible  change  in  value  and  with  no  apparent  danger  of 


':ytit:S!ssESiimtwin»ii'stuf.-  ■ 


jnses  reU- 
preceding 
jeen  based 
;n  this  ac- 
ler  the  cir- 
5  and  Gain 

)st  sight  oi 
plant.     It 
;ory.     This 
lar's  worth 
s  the  equip- 
i  that  it  is 
,s  is  that  it 
s,  the  saga- 
itten  off  for 
I  off  for  de- 
r  considera- 
;,  wears  out, 
lachines  are 
)re  they  are 
Ufe  of  some 
r  their  wear 

h  absolutely 
donment,  or 
led"  shelving, 
this  sort  are 
ft  explained, 
other  hand, 
er  year  with- 
nt  danger  of 


ACCOUNTING    SYSTEM 


83 


being  superseded  by  new  devices.  No  fixed  rule,  therefore,  can 
be  laid  down  for  estimating  depreciation  of  plant.  One  percent- 
age would  be  appropriate  for  heavy  staple  or  standard  machinery, 
another  for  small  and  special  machines  and  hand  tools,  and  still 
another  for  such  items  as  benches,  shelving  and  the  like.  No  bet- 
ter rule  can  be  offered  for  determining  the  amount  to  be  written 
off  than  the  application  of  the  cool-headed  judgment  of  a  business 
man  who  in  his  business  experience  has  seen  practically  the  vicissi- 
tuc  es  of  manufacturing  equipment. 

Whatever  the  basis  may  be  that  is  adopted  for  estimating  the 
depreciation  of  plant,  the  amount  of  the  depreciation  is  something 
also  that  must  be  spread  over  the  goods  produced  as  a  part  of 
their  cost.  If,  for  the  sake  of  illustration,  the  depreciation  in  the 
machinery  and  fixtures  of  a  given  manufacturing  department 
amounts  to  $i,ooo  a  year,  then  that  $i,ooo  must  be  spread  over 
the  goods  produced  in  a  year's  time  in  a  way  to  let  each  individual 
order  an  1  each  individual  article  bear  its  fair  share.  This  thou- 
sand dollars  may  be  spread  over  the  output  by  way  of  a  percentage, 
in  the  same  general  manner  that  the  general  or  dead  expenses  of 
the  factory  are  spread. 

An  account  with  Depreciation  should  be  opened  up,  to  be 
credited  from  time  to  time  with  the  amount  that  is  charged  to  the 
orders  upon  the  plan  above. described  and  to  be  debited  at  the 
end  of  the  year,  or  whenever  the  books  are  closed,  with  the 
amount  that  is  written  off  from  the  Plant  Account.  In  some  fac- 
tories the  percentage  to  be  charged  to  orders  is  determined  some- 
what after  the  fashion  above  described,  and  then  the  amount  is  al- 
lowed to  accumulate  on  the  credit  side  of  Depreciation  Account, 
as  the  work  progresses,  until  the  end  of  the  year,  when  so  much  is 
written  off  the  Plant  Account  as  the  credits  in  that  account  repre- 
sent. This  plan  has  the  advantage  of  exactly  balancing  the  De- 
preciation Account  and  of  writing  off  just  as  much  as  the  goods 


r 


i\ 


I  ! 


^  THE    SELF-PROVING 

produced  have  been  made  to  Stand  during  the  term. 

We  now  come  to  the  consideration  of  the  accounts  to  be 
conducted  where  the  manufacturing  department  becomes  so  ex- 
tended that   the  goods  produced,   in   addition   to  being   sold 
through  the  regular  sales  department  of  the  business,  are  jobbed 
or  sold  at  wholesale  in  various  directions.     What  modification  or 
addition  to  the  books  should  be  made  in  view  of  these  conditions? 
In  our  discussion  of  the  divisions  of  the  Merchandise  Account,  par- 
ticulariv  in  the  chapter  entitled  Classification  of  Accounts,  we 
have  pointed  out  that  there  may  be  various  Buying  Accounts  and 
various  Selling  Accounts,  one  line  of  division  being  a  diflference  in 
profits  in  the  classes  of  goods  represented.     At  the  outset,  under 
the  conditions  which  we  are  now  considering,  it  should  be  re- 
marked that  the  difference  in  profit  on  the  goods  sold  between 
jobbing  prices  and  retail  prices  very  generally  warrants  two  Sell- 
ing Accounts.  .^ 

The  Private  Ledger  and  Perpetual  Balance  Sheet  supplied 
with  the  Self-Proving  Accounting  System  has  various  blank  col- 
umnc  adapted  for  use  in  cases  of  this  kind.     The  regular  Selling 
Account  could  be  qualified  by  adding  to  it  "Retail,"  and  a  new 
Selling  Account,  entitled  Selling  "Wholesale,"  could  be  opened  in 
one  of  the  blank  spaces.     Let  this  Wholesale  Selling  Account  take 
from  Buying  Account  all  those  goods  which  are  jobbed  or  sold 
wholesale,  and  let  it  in  turn  receive  the  credits  for  the  sales  made 
in  a  wholesale  way.     The  result  will  be  that  the  balance  in  this  ac- 
count will  always  show  the  profit  or  loss  on  the  goods  that  are  sold 

to  the  trade. 

A  similar  division  of  personal  accounts  should  be  made  in  the 
section  devoted  to  Accounts  with  Customers.  The  Private 
Ledger  and  Perpetual  Balance  Sheet,  as  herein  illustrated,  shows 
columns  for  the  accounts  with  Instalment  Customers  and  with 
Sundry  Debtors.     Sundry  Debtors,  as  we  have  explained,  is  the 


^j?gig^iLilj,  !ljlHMjtU""''T^' 


mmmi-  i--'-"-" 


ACCOUXTIXO    SYSTEM 


So 


)unts  to  be 
)mes  so  ex- 
being   sold 
,  are  jobbed 
lification  or 
conditions? 
ccount,  par- 
ccoinits,  we 
ccounts  and 
diflference  in 
>utset,  vinder 
^lould  be  re- 
sold between 
nts  two  Sell- 

leet  supplied 
us  blank  col- 
gular  Selling 
,"  and  a  new 
be  opened  in 
Account  take 
jbbed  or  sold 
he  sales  made 
nee  in  this  ac- 
s  that  are  sold 

)e  made  in  the 
The  Private 
strated,  showJ 
Tiers  and  with 
plained,  is  the 


division  in  which  the  accounts  with  those  various  persons  are  lo- 
cated to  whom  credit  from  time  to  time  is  extended  upon  some 
special  or  unusual  basis.  It  is  intended  to  be  the  miscellaneous 
division,  the  catch-all  of  this  general  class  of  accounts.  A  set  of 
blank  columns,  however,  is  provided  in  Accounts  with  Debtors, 
which,  it  is  suggested,  should  be  used  for  the  special  purpose  now 
in  view,  and  should  be  named  Wholesale  Customers  or  Trade  Cus- 
tomers. 

Assign  a  certain  portion  of  the  Debtors'  Ledger  to  these  ac- 
counts and  then  let  this  new  columnar  division  of  the  Private 
Ledger  and  Balance  Sheet  bear  the  same  relation  to  the  new  set 
of  accounts  that  the  Instalment  division  bears  to  the  accounts  in 
the  Instalment  Ledger.  By  this  plan  the  wholesale  trade  will  be 
kept  entirely  distinct  from  the  retail  trade,  in  record  of  profits,  in 
general  accounts  and  in  individual  accounts. 


CAPITAL  ACCOUNT  VS.  PROPRIFTOR'S  ACCOUNT 

The  treatment  of  the  Capital  Account  of  a  business  is  fre-  • 
quently  a  matter  of  some  confusion  and  uncertainty.  The  con- 
fusion occurs  in  failing  to  distinguish  between  the  amount  in- 
vested in  the  business  as  capital,  and  the  sums  which  are  with- 
drawn from  time  to  time  by  the  proprietor  or  proprietors  for  per- 
sonal expenses.  The  uncertainty  is  owing  in  many  cases  to  the 
loose  ideas  of  both  proprietor  and  bookkeeper  with  respect  to  the 
permanency  of  the  investment  account.  The  best  results  in 
accounting  are  obtained  by  strict  classification  in  this  matter  as 
well  as  in  all  others.  It  is  expedient  to  regard  the  capital  of  the 
business  as  a  fixed  quantity,  not  to  be  changed  on  the  books,  save 
only  as  it  is  varied  by  an  additional  investment,  declared  to  be  such, 
or  by  a  positive  withdrawal  of  capital,  also  declared  to  be  such  at 
the  time. 

The  Capital  or  Investment  Account  of  the  business,  it  is  rec- 
ommended, shall  be  an  account  separate  and  distinct  from  the  pro- 
prietor's personal  account.  Even  though  the  business  be  owned 
by  one  man  this  course  is  expedient.  When  the  business  is  the 
property  of  a  partnership  between  two  or  more  men  it  is  still  more 
desirable  from  an  accounting  point  of  view.  In  general  this  plan 
is  advisable  for  the  purposes  of  correctly  declaring  results  and 
showing  the  progress  of  the  business  from  day  to  day.  A  good 
plan  is  to  treat  the  Capital  Account  of  the  firm  or  single  owner  just 
as  though  it  were  the  capital  of  a  corporation  represented  by  stock 
certificates.     Such  a  course  will  save  many  complications  and 


:COUNT 

ess  is  fre- 
The  con- 
nount  in- 
are  with- 
rs  for  par- 
ses to  the 
ect  to  the 
results  in 
matter  as 
ital  of  the 
ooks,  save 
to  be  such, 
be  such  at 

3,  it  is  rec- 
m  the  pro- 
be owned 
less  is  the 
still  more 
1  this  plan 
ssults  and 
A  good 
3wner  just 
d  by  stock 
tions  and 


ACCOUNTING    SYSTEM  9f 

avoid  perplexing  situations  from  which  only  expert  talent  can 
derive  the  proper  result.  If  the  bookkeeper  becomes  imbued  with 
this  idea  of  treating  the  Capital  Account  as  a  fixed  quantity,  with 
all  withdrawals,  etc.,  to  be  recorded  in  the  partner's  private  ac- 
count, and  proceeds  accordingly,  he  will  encounter  no  embar- 
rassing difficulties,  but  instead  will  find  the  way  easy  at  every  step. 

The  private  account  with  the  proprietor,  recording  the 
moneys  drawn  from  the  business  for  personal  expenses,  it  is  rec- 
ommended to  open  in  that  portion  of  the  ledger  known  as  Sundry 
Debtors.  The  proprietor  will  be  a  debtor  to  the  business  until 
the  amounts  of  his  drafts  have  been  ofifset  by  a  credit  for  services 
or  by  a  portion  of  the  profits  of  the  business. 

Several  ways  may  be  suggested  for  managing  the  proprietor's 
private  account  in  this  particular.  The  amounts  withdrawn  may 
be  allowed  to  accumulate  to  the  end  of  the  year,  to  be  ofifset  at 
that  time  by  a  credit  from  Dividends  and  Divisions  Account,  or 
the  credit  from  profits  may  be  made  monthly.  The  proprietor 
may  also  be  credited  month  by  month  with  a  salary  allowance,  the 
amount  of  the  allowance  being  proportionate  to  his  assumed  value 
in  the  business.  This  last  suggestion  is  based  upon  the  generally 
admitted  proposition  that  no  business  can  be  declared  to  be  mak- 
ing money  in  the  strict  sense  of  the  word  until  it  has  returned  an 
interest  on  the  capital  employed  equal  to  what  could  have  been 
obtained  for  that  capital  if  it  had  been  invested  in  the  open  mar- 
ket under  like  conditions  of  risk,  together  with  an  amount  equal 
to  the  salary  the  proprietor  could  have  earned  had  he  also  sold  his 
services  in  the  open  market.  Crediting  the  proprietor  with  a  sal- 
ary, therefore,  which,  of  course,  would  be  charged  as  one  of  the 
Expenses  of  Doing  Business,  puts  the  business  in  correct  relation- 
ship to  the  Profit  and  Loss  Account  at  all  times. 

Sometimes  the  proprietor  of  a  business  becomes  the  cus- 
tomer of  that  business  to  the  extent  of  buying  goods  from  the 


at^ 


i„-|[rti-|-ii¥  "i-iiniin --mn  ■-  '.y  -iffifii'  ■'■tJi. 


H  THE    i^KLF-rKOVIXO 

Store.  On  the  basis  of  classification,  and  for  reasons  explained  in 
another  pape  in  this  book,  where  classification  of  accounts  is 
specially  discussed,  it  is  recommended  in  such  cases  that  an  ac 
count  be  opened  with  the  proprietor  for  goods  purchased,  locating 
the  account  in  Sundry  Debtors  ledger.  To  close  this  account, 
whenever  it  is  desired  to  do  so  let  the  proprietor  draw  the  cash  on 
his  salary  account  or  otherwise  and  pay  the  amount.  This,  of 
course,  amounts  to  a  cross  entry  through  the  medium  of  the  cash 
book.  This  plan  is  not  essential  to  the  system  here  explained,  but 
every  intelligent  bookkeeper  will  readily  perceive  that  such  a 
course  simplifies  the  entries  to  be  made  whenever  goods  are  taken 
on  account  by  the  proprietor  or  a  partner.  Of  course,  if  desired 
a  cross  entry  through  the  cash  journal  can  be  made  direct,  but  in 
that  case  the  bookkeeper  would  ordinarily  proceed  without  a 
voucher,  and  vouchers  are  always  desirable. 

Again,  where  the  proprit.  jr  lends  the  business  an  amount  of 
money  for  a  short  time,  or  advances  some  capital  on  a  temporary 
basis,  it  is  expedient  to  open  an  account  for  the  transaction  in  that 
portion  of  the  ledger  known  as  Sundry  Creditors.  If  the  money 
furnished  is  intended  to  be  a  permanent  addition  to  capital,  then, 
of  course,  the  Capital  Account  should  be  credited,  as  elsewhere 
explained.  But  if,  as  frequently  occurs,  the  amount  furnished  is 
advanced  only  as  a  temporary  accommodation  to  the  business, 
and  is  to  be  repaid  at  an  early  date,  tnen  it  is  expedient  to  let  Capi- 
tal Account  alone  and  to  credit  the  amount  to  a  special  account 
opened  with  the  proprietor  in  that  part  of  the  ledger  devoted  to 
the  accounts  of  creditors  of  the  business. 

This  plan  may  be  objected  to  by  certain  bookkeepers,  because 
in  the  event  of  failure  of  the  business,  the  private  account  of  the 
proprietor,  as  one  of  the  liabilities  of  the  concern,  would  be  in- 
stantly thrown  out  by  any  competent  auditor,  and  more  especially 
by  the  courts.     All  this  is  frankly  admitted,  but,  on  the  other 


>s«S!SB«S!WS«aSS«?BS 


ArCOt'N'TINO    8YSTE>f 


SO 


plained  in 
counts  is 
lat  an  ac 
I,  locating 
i  account, 
le  cash  on 
This,  of 
if  the  cash  . 
ained,  but 
at  such  a 
,  are  taken 
if  desired 
ect,  but  in 
without  a 

amount  of 
temporary 
ion  in  that 
the  money 
pital,  then, 
elsewhere 
urnished  is 
e  business, 
;o  let  Capi- 
ial  account 
devoted  to 

:rs,  because 
)unt  of  the 
ould  be  in- 
e  especially 
I  the  other 


hand,  it  should  be  remembered  that  the  object  of  bookkeeping  is 
to  take  care  of  a  going  business — not  to  provide  for  one  that  is 
insolvent.  Accordingly  it  is  not  necessary  to  assume  in  advance 
that  the  result  of  the  business  is  to  be  disastrous,  and  therefore  to 
commence  arranging  the  accounts  as  they  would  l)e  classified  on 
the  assignee's  schedules.  The  accounts  that  are  opened  and  k«'i)l 
in  a  business  should  always  show  the  correct  relationship  of  the 
business  to  the  proprietor,  as  well.  also,  as  the  relationship  oi 
debtors  and  creditors  to  the  business.  A  temporary  loan  made  t' 
the  business  by  the  proprietor,  fo'  example,  of  a  thousand  dol- 
lars, does  not  need  to  be  put  into  Capital  Account  simply  because 
in  the  event  of  disaster  overtaking  the  business  the  account  of  this 
thousand  dollars,  located  among  the  liabilities  of  the  business, 
would  be  ruled  out.  '  ' 

In  the  case  of  failure  the  Capital  Account  is  itself  ruled  out, 
and  in  disaster  various  changes  are  made  in  the  arrangement  of  the 
accounts  by  the  receiver  or  assignee  that  the  bookkeeper  would 
not  think  of  introducing  while  the  business  is  a  going  enterprise. 

Let  us,  then,  look  at  the  facts  of  the  case  as  they  are  with  the 
business  considered  as  an  entity,  apart  from  the  proprietor.  The 
proprietor  holds  the  business  responsible  to  himself  for  all  the 
money  he  puts  into  it.  He  recognizes  that  in  the  event  of  failure 
he  will  not  get  anything  back,  whether  on  loan  account  or  capital, 
until  the  other  or  general  creditors  are  paid  in  full.  Notwith- 
standing this  he  regards  one  portion  of  the  money  he  supplies  to 
the  business  as  a  permanent  investment  and  another  portion  as  a 
temporary  accommodation  only.  It  is  quite  as  right,  then,  that 
the  accounts  should  be  kept  in  a  way  to  agree  with  his  reasonable 
views  in  this  regard  as  that  they  should  be  kept  in  a  way  to  pro- 
vide the  classification  which  auditors  and  the  courts  very  properly 
insist  upon  when  the  business  is  no  longer  a  going  concern,  but 
instead  is  a  wreck  to  be  broken  up  and  the  parts  distributed  as  the 


.U«MtW«J»»»»^l"~ 


II 


iir -nn'r-rrf -"''■** 


m. 


•0 


THE    SELF  PROVING 


inicres.f'5  of  creVitors  inay  appear. 

Where  there  are  several  partners  in  the  business  it  is  recom- 
m-ndc.l  that  their  inchvi(htal  contrilnitiuiis  of  capital  be  arranged 
and  adjusted  l)y  their  partnership  agreement,  and  th'it  the  total 
amount,  whatever  it  may  be  and  irrespective  of  tbe  fact  some- 
time? prevaihng  that  the  contributions  arc  unec|ual  in  amount,  be 
pooled  ui  one  sum,  and  that  this  sum  be  entered  to  the  credit  of 
the  CapitM  Account  as  the  capital  of  th.:   business.     Let  this  ■ 
amount  remaui  as  a  fixed  quantity  until  it  is  varied  by  a  settlement 
between  partners  or  by  a  modification  of  their  articles  of  agree- 
ment.    Open  an  account  with  each  individual  partner  for  amounts 
withdrawn  by  him,  all  as  set  forth  in  the  preceding  paragraphs,  off- 
setting these  withdrawals  from  time  to  time  by  cre*li»  ^  on  account 
of  salary  or  by  shares  of  the  profits.     Where  one  of  the  partners 
makes  a  temporary  loan  to  the  bu;  iicis,  open  an  account  with  him, 
placing  it  among  the  accounts  of  the  regular  creditors  of  the  con- 
cern, or,  as  is  preferred  in  some  cases,  give  him  the  farm's  note  for 
the  amount,  thus  letting  the  liability  appear  in  Notes  Payable 

Account. 

The  reasons  which  prevail  in  the  minds  of  some  bookkeepers 
against  opening  among  the  accounts  showing  liabilities  of  the 
business  an  account  with  the  proprietor  for  moneys  temporarily 
loaned  the  concern  would  not  prevail,  of  course,  where  there  are 
several  partners  and  only  one  of  them  extends  an  accommodation. 
In  such  a  case,  in  the  event  of  disaster,  this  partner's  special  con- 
tribution to  the  business  stands  in  diflferent  relationship  thereto, 
at  least  so  far  as  the  partners  themselves  are  concerned,  from  that 
of  his  original  contribution  to  the  fixed  capital  of  the  firm. 

Difficulties  in  partnership  settlements,  and  the  accounting 
complications  that  arise  in  the  books  of  enterprises  in  which  two 
or  more  persons  are  interested,  would  be  entirely  avoided  if  proper 
care  were  taken  in  the  first  place  to  define  the  relationship  that  is 


is  recom- 
arranged 
the  total 
ict  sonie- 
noi^nt,  be 
:  credit  of 

Let  this  • 
lettlement 
of  agree- 
r  amounts 
raphs,  off- 
)n  account 
e  partners 
;  with  him, 
Df  the  con- 
I's  note  for 
;s  Payable 

jokkeepers 
ties  of  the 
emporarily 
e  there  are 
imodation. 
ipecial  con- 
lip  thereto, 
1,  from  that 
rm. 

accounting 

which  two 

ed  if  proper 

iship  that  is 


■scssiBKsssiiwaiW 


J 


-1^  aL'tAa>  Ml-Jti^^.-'.y.'^S^- 


IMAGE  EVALUATION 
TEST  TARGET  (MT-3) 


1.0 


1.1 


■^■18     |2.5 


us 


I" 


2.2 

Mm 


—  '""-=  11^ 


<■ 


■73 


^'^^" 


'V 


^ 


L 


Photographic 

Sciences 

Corporation 


■y 


23  WEST  MAIN  STREET 

WEBSTER,  N.Y.  MS80 

(716)872-4503 


CIHM/ICMH 

Microfiche 

Series. 


CIHM/ICMH 
Collection  de 
microfiches. 


Canadian  Institute  for  Historical  IVIicroreproductions  /  Institut  Canadian  de  microreproductions  historiques 


- .  _'||||"l_;i|PiiPl!i^' 


ACCOUNTING    SYSTEM 


m 


k 


to  exist  between  the  men  in  the  partnership,  and  if  the  accounts 
were  kept  with  the  capital  invested  in  the  business  and  the  amounts 
withdrawn  upon  the  principles  here  laid  down. 

In  the  Self-Proving  Accounting  System  the  account  called 
Dividends  and  Divisions,  which  is  more  fully  explained  on  another 
page  in  this  volume,  shows  as  often  as  Loss  and  Gain  Account  is 
balanced  the  net  profits  of  the  business  to  date.     If  the  proprietor 
or  partners  are  credited  from  time  to  time  with  a  salary  allowance, 
the  same  being  charged  up  as  one  of  the  expenses  of  doing  busi- 
ness, then  the  balance  in  this  account  will  show  the  net  profits 
ready  to  pass  to  the  credit  of  the  Proprietor's  Account  or  Part- 
ners' Accounts,  as  the  case  may  be,  to  oflfset  special  drafts.     If  no 
salary  allowance  has  been  charged  up,  then  the  balance  in  Divi- 
dends and  Divisions  Account  will  be  proportionately  larger,  but 
still  in  shape  to  be  transferred  in  whole  or  in  part  to  the  credit  of 
the  proprietor's  account  or  partners'  accounts,  as  the  case  may  be, 
to  offset  their  drafts.     Credits  to  the  partners'  accounts  in  this 
form,  or  transfers  from  the  Dividends  and  Divisions  Account,  it 
will  be  seen,  can  be  made  as  frequently  as  may  be  desired.     By 
using  the  facilities  which  this  account  provides  the  bookkeeper 
should  have  no  difficulty  in  keeping  the  proprietor's  account  or 
partners'  accounts,  as  the  case  may  be,  in  such  a  condition  as  to  be 
entirely  satisfactory  to  them  in  view  of  the  actual  progress  of  the 
business,  and  yet  avoid  the  complications  in  settlements  which 
often  arise  in  such  cases. 


; 


!    / 


11, • 


'^Jp-f^.tif       '*(    *"       ' 


^v 


mwmt'.mw 


PART    II 


THE    SELF-PROVING 

ACCOUNT   BOOKS 


n 


I 


CONSTRUCTION    OF    THE  BOOKS 
The  principal  books  used  with  the  Self-ProvinB  Accounting 
System  are  special  in  construction  and  make  use  of  new  features 
fn  blank  book  work.    They  are  composed  of  wide  and  narrow 
eav«  arranged  in  sets,  with  the  parts  of  the  wide  leaves  project- 
ng  b  yond  L  narrow  leaves,  thickened  or  reinforced  so  as  to 
omp  nsate  for  the  thickness  of  the  narrow  leaves^    By  th.s  con- 
Tction  an  even  surface  for  writing  is  furnished  wherever  th 
book  may  be  opened,  and  at  the  same  .,me  ----- 
monthly  spaces  or  other  vertical  divisions  of  the  pages  are 
Tough  in  contact  with  a  single  writing  of  the  names  of  accoun^^ 
The  pages  of  the  several  books  are  for  the  most  part  ruled 
with  fifty  lines  to  the  page.    The  lines  are  numbered,  and  the 
Tages  are  also  numbered.    By  a  combination  of  the  page  number 
'ead  with  a  line  number  a  reference  is  not  only  possible,  but  very 
convenient  to  any  part  of  any  page.  =.„  p..„vin» 

The  Self-Proving  Mercantile  Ledger  and  the  Self-Provmg 
Instalment  Ledger,  both  of  which  are  illustrated  by  mnu^ure 
fac-similies,  are  provided  with  reference  mdexes.  consisting  of 
numerals  representing  the  page  numbers  printed  marginally  on 
the  pages,  in  combination  with  tags  so  placed  on  successive 
leaves  that  by  Hfting  the  tag  opposite  the  number  of  a  required 
page  the  book  will  be  opened  to  that  page.    This  ,s  the  case 
whether  the  book  be  opened  from  the  front  toward  the  back  or 
from  the  back  toward  the  front.  .      .     ,     i,. 

The  novel  features  of  construction  embodied  m  the  books 


iC-J 


00 


TIIK    SELF  ril(>VIX(} 


used  with  the  Self-Proving  Accounting  System  are  fully  covered 
l)v  patents.  The  design  and  arrangement  of  the  individual  pages 
in  the  different  books  have  been  protected  by  copyrights,  and 
the  term  "Self-Proving,"  which  is  used  in  connection  wit  i  the 
system,  also  as  a  part  of  the  name  of  each  of  the  books,  has  been 
secured  to  the  Self-Proving  Account  Book  Company  both  by 
copyright  and  under  the  cc5mmon  law  with  respect  to  trade  marks. 


THE  SELF-PROVING  INSTALMENT  LFDQER,  OPEN.      (COPYRIGHT  1897  BY  J    F.  BROWN 

AND  A.   O    KITTREDQE) 

The  first  of  the  accompanying  illustrations  shows  one  of  the 
ledgers  of  the  Self-Proving  Accounting  System  open  in  the  mid- 
dle and  displaying  the  wide  and  narrow  leaves,  together  with  the 
ruling  of  the  pages  and  the  marginally  printed  index  figures  and 
their  complement  of  tags.  It  also  indicates  how  each  signature, 
composed  of  a  pair  of  wide  leaves,  thickened  or  reinforced  in  that 
portion  of  their  width  projecting  beyond  the  narrow  leaves,  to- 


iiTiririiitir'r"- 


'I'^tl'Tif'^"  l"      1^*11" 


lly  covered 
idual  pages 
rights,  and 
n  wit!i  the  > 
s.  has  been 
ly  both  by 
•ade  marks. 


J    F.  BROWN 

s  one  of  the 
in  the  mid- 
ler  with  the 
figures  and 
h  signature, 
reed  in  that 
/  leaves,  to- 


ACCnr.NTINC    SYSTEM 


l»7 


gether  with  their  complement  of  narrow  leaves,  forms  a  section  of 
the  book  of  even  thickness,  so  as  to  present  a  flat  writing  surface 

at  all  points. 

The  second  illustration  shows  the  constructi.m  of  the  same 
book  from  another  point  of  view,  and  perhaps  still  better  dlus- 


B.CK  V.W  O.  S..-PB0V.3  .ST.^.M..T  -«-     -™^  -"  ^  ^^  ^^  ^^^ 

trates  the  relationship  of  the  wide  and  narrow  leaves  and  the 
thickened  margins  of  the  wide  leaves,  arranged  to  compensate  for 


/ 


"'"  "I'T^ 1  ~^^" 


J)S 


THE    SELl'-rKOVlNG 


.,„  increased  thickness  of  the  book  caused  by  the  presence  o.  the 

""TtfsII^Provin,  Accounting  Systen,  is  not  a  secret  sy.en, 
„o.  is  it  supplied  to  business  ntcn  under  t^t—  -    -  ' 

-:;rrir::rr:an"isattic,eso. 

^ranCpln  wHch  ate  necessat.  - Jts  '— nt  an 

eeonotnica,  ^--^:^".zT::zz:x :::  ^-^^o. 
:::=r^."vrt,,e,o.s.pt.esc™s^^^^ 

as  to  discourage  competition  and  to  make  piracy 

^^^^Cs:;:^  Account  BooU  company  does  not  restrict 
;  tn  the  special  books  described  herem,  nor  to 

Lde  to  ordT  ttpon  the  most  reasonable  terms. 


9  * 


«»■ 


jiiMii'lii'f'"'* 


■II  ■irriTiM  *i< 


;sence  of  the 

:cret  system, 
,  nor  yet  is  a 
i  features  are 
us  articles  of 
nvenient  and     i 
are  described 
he  Self-Prov-    ^ 
)nsistent  with 
eclared  poUcy 
:  prices  so  low 
and  imitation 

es  not  restrict 
herein,  nor  to 
;  in  addition  is 
nd  methods  of 
other  purposes 
•eferred  to  can 
meet  the  ideas 
siness  men  are 


PRIX- VIE  LEDGER  AND  PERPETUAL  BALANCE 

SHEET 

The  principal  book  in  the  Self-Proving  Accounting  System 
is  the  Private  Ledger,  which  may  be  described  as  a  condensed 
summarv,  in  tabular  form,  of  all  the  transactions  of  the  busmess, 
so  arranged  as  to  constitute  a  perpetual  balance  shee    of  tl^ 
business.     It  is  constructed  like  various  other  books  of  the  Self- 
Proving  Accounting  System,  with  narrow  and  wide  pages,  with 
those  portions  of  the  wide  pages  which  project  beyond  the  nar- 
row pages  thickened  or  reinforced  in  a  way  to  compensate  or  the 
increased  thickness  of  book  caused  by  the  narrow  pages,  tjnts  af- 
fording a  level  writing  surface  at  all  times.     The  various  accounts 
are  arranged  in  cohunnar  form  in  the  narrow  pages  m  such  a  way 
that  bv  turning  the  narrow  pages  they  are  brought  successively 
agains't  the  names  of  accounts  or  dates  that  are  written  on  the  firs 
^^lle  page.     The  rtdings  of  faint  lines  (horizontal  divisions)  are 
numbered  both  on  the  wide  pages  and  on  the  narrow  pages,  thus 
facilitating  the  extension  of  amounts  opposite  a  given  date  oi 
name  of  account  through  the  several  account  columns  on  the 

narrow  pages.  ,  , 

The  Private  Ledger  is  opened  by  entering  m  tlte  several  ac- 
count columns  provided  for  the  purpose  the  balances  represent- 
ing the  business.  It  is  maintained  by  posting  to  .t,  day  by  day, 
,^.eek  by  «eek  or  month  by  month,  as  may  be  preferred,  a  sum- 
mary statement  of  the  transactions  of  the  business  so  classified 
and  arranged  as  to  correspond  «.ith  the  balance  sheet  prmople 
upon  which  principle  the  book  is  started. 


I 


_  THK    SELFPKOVINO 

The  Private  Lolgcr  and  Balance  Sheet  provides  within  ,.- 
self  the  tneans  for  eross  entries  hetvveen  certan,  acconnts,  t^hus 
1  ^^^  it  ,»s.ihie  to  show  the  gross  profits  in  Sehn.g  and  o.he, 
:       r  aca,u„.s.  with  proper  halances  to  he  transferred  u,  U,         . 
an.l  Ciain  aeeount.     Uy  sin,i,ar  eross  entry  the  1-i™  "^^ 
Unsiness  are  hkewise  earried  to  Loss  and  Can,  A    on  t    Uu 
showing  in  that  aeconnt  net  profits  or  net  losses     In   n  n,  Lo  . 
„d  Gal  Aceonnt.  where  a  profit  is  tnade,  .s  dose    -"-  ^    ; 
dends  and  Divisions.     The  latter  aeeonn    reeords     ;    '  -'^ - 
tions  of  profits  among  partners  and  stoekholders      W  he.  a  loss 
made    he  Loss  and  Gain  Aeeonnt  eloses  into  Impa.rn.en    and 
Bnr  1      Account.    The  latter  account  records,  on  the  one  han^ 
^In     loss  of  a  hnsiness,  where  it  has  been  done  at  a  loss,  or  the 
acarulated  surplus,  where  profits  have  heen  made  and  a  part  or 
-,11  allowed  to  remain  in  the  busmess. 

Z  Private  Ledger  and  Perpetual  Balance  Sheet  starts  ,n 
,„„„«     There  are  posted  to  it,  front  time  to  ti,ne,  the  totals  o. 
!r    ^sac.ions  for  a  day  or  other  period,  which  are  also  ,n  bal- 
':       Cfl  the  accuracy  of  the  Private  Ledger  „,a^.  he 
1  n,  anv  time  by  ordinary  trial  balance  methods.     Proof 
rrl   rep— fL  this  purpose.     All  of  the  other  booUs  in 
h eTtem  are  auxiliary  to  the  Private  Ledger  a,,d  Balance 
S  eefand  a  number  of  them  are  posting  medium^,  to  ,t.      n  t  h, 
^.  however,  various  sets  of  books  wotdd  *««  ».th    a^ 
other  because  the  conditions  surrounding  the  use  of  the  Pnvate 
Ledger  are  sufficiently  elastic  to  admit  of  numerous  n,od,fiea- 

"°"  xLttStr-  example,  of  the  accounts  that  are  posted  to 


i*i.]>'iaiim»**'JW"if  i<^ 


In 


ides  within  it- 
iccouiits,  thus 
linji  and  other 
fcrrcd  to  Loss 
enscs  of  Doing 
Account,  thus 

In  turn,  Loss 
3scd  into  Divi- 
Is  the  distril)U- 

Whcrc  a  loss 
mpairnient  and 
n  the  one  hand, 
at  a  loss,  or  the 
le  and  a  part  or 

Sheet  starts  in 
rne,  the  totals  of 
1  are  also  in  bal- 
Ledger  may  be 
nethods.  Proof 
le  other  books  in 
rer  and  Balance 
ns  to  it.     In  this 

differ  with  each 
ise  of  the  Private 
merous  modifica- 

hat  are  posted  to 
ment  Ledger  Ac- 
y  be  derived  from 
tained  by  columns 
Tis  through  which 


\rr(»tNTI.N<J    SYSTBM 


101 


the  accou.its  are  carried  to  the  Instalment  Le.lger.  The  same 
principle  applies  with  respect  to  Sundry  Debtors.  Sundry  Cred- 
itors. Purchase  Accovmts.  Expense  Accou.Us  and  all  the  other 

groups  or  classes. 

The  immediate  means  of  posting  the  Private  Ledger  and 
Balance  Sheet  may  be  a  special  report  of  the  trat.sactions  of  the 
business  on  a  blank  provided  for  the  purpose,  or  a  book  convem- 
eutlv  arranged  for  the  same  may  be  employed,  or  the  transactions 
may  be  summarized  on  the  face  of  the  Cash  Journal,  elsewhere  de- 
scribed in  this  volume,  and  the  footings  of  the  columns  earned  to 
the  proper  accounts  in  the  Private  Ledger. 

None  of  the  other  books  of  the  system  in  itself  will  be  m 
balance,  nor  will  all  the  auxiliary  books  taken  together  be  m  bal- 
ance, for  the  opening  balances  are  entered  in  the  Private  Ledger 
only,  but  each  auxiliary  book,  when  correct,  will  be  tn  balance 
with  the  corresponding  accout  in  the  Private  Ledger. 

Inasmuch  as  at  the  beginning  the  balances  in  the  accounts 
representing  the  business  are  entered  in  the  Private  Ledger,  and 
t^owhere  else,  then  the  accounts,  to  whatever  degree  extended  m 
the  other  or  auxiUary  books,  will  only  represent  the  transactions 
of  the  period  for  which  they  are  conducted.     This  may  be  illus- 
trated by  referring  to  the  Cash  Account.     At  the  commencement 
the  balance  of  cash  on  hand  is  entered  in  the  Private  Ledger  m 
the  debit  column  of  the  pair  entitled  Cash.     In  the  Cash  Book  m 
the  general  office  there  is  recorded  simply  the  transactions  of  the 
day  or  other  period.     There  are  show.,  simply  so  much  receipts 
and  so  much  disbursements.     The  report,  therefore,  is  stmp  y  a 
footing  of  the  cash  columns  for  the  day  or  other  period,  which 
amounts  are  posted  to  the  Private  Ledger. 

This  feature  of  the  book  and  method  of  management  fully 
justifies  the  name  "Private  Ledger,"  for  in  a  single  book,  as  it 
will  be  perceived,  there  are  contained  all  the  secrets  of  the  busi- 


dMiMiaiMaiMMa 


f. 


lOli 


THE    SELF-rROVlNG 


!l 


i    !; 


ness,  and  to  this  book  there  are  posted,  day  by  day  or  otlier  con- 
venient period,  a  summarized  statement  of  the  transactions  of  the 
business.  In  turn  the  Private  Ledger,  without  reference  to  any 
other  parts  of  the  system,  provides  within  itself  the  opportunity 
of  making  the  cro3S  entries  previously  referred  to,  thereby  declar- 
ing the  profits  or  losses  of  the  business.  And  all  this  is  done  in 
the  privacy  of  the  proprietor's  office  or  at  the  desk  of  his  confi- 
dential man.  The  general  or  auxiliary  books  of  the  system, 
therefore,  become  simply  days'  records,  conducted  in  a  way  to 
facilitate  summarizing  for  the  purpose  of  posting  to  the  Private 
Ledger. 

With  the  object  of  closely  scrutinizing  the  progress  of  a 
business,  it  is  recommended  that  the  Private  Ledger  be  posted 
daily  and  that  the  bookkeeper  be  directed  to  furnish  for  it  at  the 
close  of  each  day's  business  a  summarized  statement  from  the 
several  auxiliary  books  in  his  charge,  including  amount  of  Sales, 
Cash  Receipts  and  Cash  Disbursements,  Transactions  with  the 
Bank,  amount  of  Purchases,  Notes  Receivable  and  Notes  Paya- 
ble, together  with  the  totals  of  the  amounts  posted  to  each  of  the 
several  divisional  ledgers.     From  time  to  time— not   less  fre- 
quently than  once  a  month,  and  in  many  lines  of  business  it  is 
advantageously  done  weekly— it  is  recommended  that  cross  en- 
tries be  made  in  the  Private  Ledger  in  the  manner  hereafter  de- 
scribed, and  as  illustrated  in  the  miniature  fac-simile  book  pre- 
sented herewith.     Constantly  Iceeping  before  the  business  man 
the  actual  results  of  the  transactions  upon  which  he  is  engaged 
is  the  acme  of  the  service  which  accounts  can  render. 

The  reasons  for  the  extended  and  very  carefully  prepared  di- 
rections with  reference  to  classification  of  accounts,  to  which  a 
number  of  pages  in  this  book  are  devoted,  become  apparent  when 
the  balance  sheet  feature  of  the  Private  Ledger  is  considered. 
For  the  purpose  of  making  the  reader  familiar  with  the  methods 


I  iiiiiliiOWiM 


■  -^j^rfg^.^.^-^-«^.^ ^ r«iii<iiftiiiW-"-w.»^""''"''''-»^''*~ 


or  other  con- 
lactions  of  the 
erence  to  any 
e  opportunity 
hereby  declar- 
this  is  done  in 
k  of  his  confi- 
•f  the  system, 
d  in  a  way  to 
to  the  Private 


ACCOUNTING    SYSTEM 


108 


o,  using  the  Private  Ledger  and  Bdance  S'-t  some     ust  a  , 
are  shown  on  the  fac-shnile  pages  presented  herewth.     A    th 
le  .he  Private  Ledger  is  opened  the  business  ,s  represented  by 
a  balance  sheet  as  follows:— 


progress  of  a 
Iger  be  posted 
sh  for  it  at  the 
nent  from  the 
lount  of  Sales, 
tions  with  the 
d  Notes  Paya- 
l  to  each  of  the 
—not  less  fre- 
f  business  it  is 

that  cross  en- 
:r  hereafter  de- 
mile  book  pre- 
t  business  man 
I  he  is  engaged 
ler. 

illy  prepared  di- 
nts, to  which  a 
;  apparent  'vhen 
r  is  considered, 
ith  the  methods 


,mw»<g"  ,W'»jw^ffjggjHai 


■Mti'^ 


^r 


Km/mi  T 


KM 


THE    SELF-PROVING 


.  ;  i; 


iiil 


RESOURCES  : 


lOO.OO 


Cash 

Bank 2'50o.oo 

Manufacturing i ,  500.00 

Buying 10,500.00 

Instalment  Ledger 35. 500  00 

Sundry  Debtors 3,500.00 

Notes  Receivable 2,675.00 

Investments  : 
Necessary : 

Mfg.  Plant 2,500.00 

Store  Fixtures 1,650.00 

Office  Furniture (14,700.00)      550.00 

Speculative  ; 

Real  Estate 10,000.00 

U.  S.  Bonds (|i5,200.oo)  5,200.00 

19,900.00 


LIABILITIES : 


Purchase  Accounts 

Sundry  Creditors 

Notes  Payable 

Reserve  Funds  : 
Collections : 

For  Bad  Debts 500.00 

For    Rebates    and   Allow- 
ances    175.00 

Investments : 

For  Depreciation  of  Mfg. 

Plant 125.00 

For  Depreciation  of  Store 

Fixtures 82.50 

For  Depreciation  of  Office 
»  Furniture 27.50 


Impairment  and  Surplus. 
Capital 


3,50000 
1,850.00 
2,500.00 


910.00 
1,000.00 

66,415.00 


$76,175.00       $76,175.00 


BAUkNCE  SHEET  OF  THE  BUSINESS  AT  THE  TiME  THE  PRIVATE  LEDGER  IS  OPENED. 


I, 


1 


M 


INIATURE    FACSIMILE 


OF    THE 


SELF-PROVING 

PRIVATE    LEDGER  and 

PERPETUAL    BALANCE 


SHEET 


3,50000 
1,850.00 
2,500.00 


910.00 
1,000.00 

66,41500 


10      $76,175.00 


iQER  IS  Opened. 


(SEE  PAGE  99) 


COPVFIGHT  1897 

BV  A.  O.  KlTT««UG« 


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>R     DESrORS    ACCOUNTS 

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,««a^sii|nH| 


ACCOUNTING    SYSTEM     '  !<» 

The  transactions  of  a  certain  period,  as  summarized  from  the 
various  auxihary  books,  show  as  follows:— 


I 


Dr. 

Cash... 'f  •» 

Bank ^-^^-S" 

200  OO 

Manufactunng 

„     .  81028 

Buying • 

Selling (Tsoc,  I699.92)       30.95 

Instalment  Ledger 1.102.34 

Sundry  Debtors ''♦'♦"^ 

Notes  Receivable  1,50000 

,        ,        ^  150.00 

Investments ■' 

Purchase  Accounts 2, 171. 93 

Sundry  Creditors ^^  '' 

Notes  Payable ''470^° 

„  129.72 

Expenses ^ 

^9,897. 14 


en. 

1,044.90 
1,802.07 


1,223.94 
707.63 

42.35 

200.00 

2,000.00 

1,173-81 

65.68 

1,627.66 

9.10 


$9.897. 14 


SUMMARY  OF  THE  TRANSACTIONS  OF  THE  BUSINESS  FOR  A  STATED  PERIOD. 


This  summary,  as  above  remarked,  may  be  made  up  in  the 
form  of  a  daily  report  on  a  specially  prepared  blank  (to  be  signed 
by  the  bookkeeper  and  delivered  to  the  private  office,  or  to  the 
manager's  desk,  or  mailed  to  the  proprietor's  house,  as  the  case 
may  be),  or  the  various  auxiliary  books  may  be  footed  and  their 
accounts  transferred  to  the  Cash  Journal  and  the  daily  report 
formulated  therein.  However  the  amounts  are  determined  and 
prepared,  the  manner  of  their  use  is  the  same.  The  summarized 
report  here  presented  is  more  nearly  of  the  form  which  the  report 
would  take  if  made  on  a  special  blank,  as  above  suggested.  The 
correctness  of  the  report  is  proven  by  the  footing,  the  bebits  off- 
setting the  credits. 


I 


i 


i 

.  is  f 

-III 

i 


KM! 


THE    SELF-rROVIXG 


The  statement  of  transactions,  or  bookkeeper's  report,  for 
the  period  used  for  these  illustrations,  has  been  so  arranged  as  to 
show  results  derived  from  different  lines  of  business,  the  whole  of 
which,  perhaps,  would  never  occur  in  any  one  office  in  the  interval 
of  time  indicated.     The  report,  therefore,  is  to  be  taken  merely  as 
an  illustration,  and  the  entries  as  only  suggestive,  rather  than  as 
being  the  exact  counterpart  of  what  is  met  in  any  given  direction. 
The  entry  of  the  same  in  the  illustrative  pages  is  also  a  little  dif- 
ferent from  what  would  prevail  in  practice.    The  original  balances 
would  occupy  the  first  line  of  the  book,  the  several  daily  or  other 
periodical  reports  the  succeeding  lines,  and,  finally,  the  cross  en- 
tries, line  after  line  until  completed.    The  book,  in  other  words, 
would  be  filled  up  solid.    In  the  illustrations  we  have  distributed 
the  lines  of  figures  through  the  page  in  order  to  make  them  more 
easily  read. 

A  few  words  of  explanation  of  the  Summary  of  Transactions 
for  a  Stated  Period  will  help  the  bookkeeper  to  adapt  any  set  of 
books  to  the  requirements  of  the  Private  Ledger.  This  summary 
shows  that  cash  has  been  received  to  the  extent  of  $1,476.24,  and 
disbursed  to  the  extent  of  $1,044.90.  The  bank  account  shows 
that  deposits  have  been  made  to  the  extent  of  $642.50,  and  checks 
drawn  to  the  amount  of  $1,802.07.  There  may  or  may  not  have 
been  cross  entries  between  Cash  and  Bank.  The  form  of  the  rul- 
ing employed  in  the  Private  Ledger  is  such  that  Cash  and  Bank 
Account  may  be  kept  separately  or  they  may  be  consolidated,  ac- 
cording to  the  accountant's  preference. 

Manufacturing  Account  by  the  summary  has  been  charged, 
either  Labor,  Materials  or  Expenses,  or  part  of  each,  to  the  ex- 
tent of  $200.  Goods  have  been  bought  and  charged  to  Buying 
Account  to  the  extent  of  $810.28.  Th=se  Figures  come  from  the 
Purchase  Record.  Sales  according  to  the  Sales  Record  have  been 
made  to  the  extent  of  $1,223.94  (Tsoc,  that  is  costirg  $699.92), 


ACCOUNTING    SYSTEM 


JOT 


report,  for 
inged  as  to 
le  whole  o! 
:he  interval 
n  merely  as 
her  than  as 
n  direction, 
a  little  dif- 
lal  balances 
ily  or  other 
lie  cross  en- 
ither  words, 
;  distributed 
;  them  more 

FraHsactions 
3t  any  set  of 
his  summary 
1,476.24,  and 
count  shows 
),  and  checks 
lay  not  have 
m  of  the  rul- 
.sh  and  Bank 
solidated,  ac- 

)een  charged, 
h,  to  the  ex- 
ed  to  Buying 
ome  from  the 
ord  have  been 
.irg  IP699.92), 


with  goods  returned,  or  other  corrections  made,  to  the  extent  of 
$30  95.  Acccounts  in  the  Instalment  Ledger  have  been  charged 
with  $1,102.34,  representing  the  amounts  put  out,  and  has  been 
credited  with  $707.63,  representing  collections  made  and  other 

credits. 

Sundry  Debtors  have  been  charged  with  $144-63,  and  have 
been  credited  with  $42.35-    The  business  has  taken  in  Notes  Re- 
ceivable, as  per  Bills  Receivable  Record,  to  the  extent  of  $1,500, 
and  has  parted  with  paper  of  this  kind  to  the  extent  of  $200.    In- 
vestment Accounts  have  been  charged  with  $150  (we  wdl  say,  for 
example,  in  the  purchase  of  a  new  safe  for  the  office,  therefore  to 
the  debit  of  a  Necessary  Investment  Account),  and  have  been 
credited  with  $2,000  (for  example,  by  the  selling  of  a  portion  of 
real  estate,  therefore  to  the  credit  of  Speculative  Investment  Ac- 
counts).    It  may  be  supposed  that  this  real  estate  produced  a 
thousand  dollars  of  the  cash  that  has  been  received  in  this  interval, 
and  also  a  thousand  dollars  of  the  Notes  that  have  been  taken  m 
during  the  time  for  which  this  summary  stands. 

Purchase  Accounts  are  debited  with  $2,171.93,  representmg 
the  amount  that  has  been  paid  to  creditors  of  this  class,  and  in 
turn  have  been  credited  with  $i,i73-8i,  being  the  total  of  goods 
bought  during  the  period,  together  with  the  amount  of  note 
items,  &c.,  if  any.  Sundry  Creditors  have  been  debited  with 
$67  75  and  credited  $65.68.  Notes  Payable,  as  per  Bills  Payable 
Book,  have  been  debited  $1,470.80  and  credited  $1,627.66.  Ex- 
pense AccountsJ*ave  been  debited  $129.72  and  credited  by  way  of 

corrections,  &c.,  $9.10. 

All  these  amounts  might  have  come  from  the  ordinary  col- 
umnar journal.  Each  might  have  been  obtained  from  an  auxiliary 
book,  and  the  set  of  books  to  which  this  summary  refers  might 
have  been  so  conducted  that  a  part  of  the  amounts  here  enumerat- 
ed would  have  come  from  the  journal  and  a  part  from  some  of  the 


^,,j,  THE    SELF-PKOVING 

other  auxiliary  books.  The  requirements  in  the  case  are  sitriply 
that  every  entry  by  one  channel  or  another  shall  reach  .h,s  da.ly 
sutnmary,  and  from  it  be  posted  to  the  several  accounts  m  the 

Private  Ledger.  „  .     .    i  .j„. 

The  cross  entries  which  may  be  made  m  the  Private  Ledger 
for  the  purpose  of  detennining  the  condition  of  the  business  at    ^  , 
a  given  time,  and  for  which  space  is  provided  on  the  first  broad 
page,  include  the  debiting  of  Selling  Account,  with  the  cost  of   he      , 
goods  sold,  passing  the  credit  to  Buying  Accotmt.    Th.  .s  th. 
first  cross  entry  shown  in  the  sample  presented  herew.h.    The 
restdt  of  this  entry  is  to  leave  in  Buying  Account  a  balance  repre- 
s  nting  the  cost  value  of  the  goods  on  hand.    It  has  the  further 
effect  of  leaving  in  Selling  Account  a  balance  which  represents 
the  gross  profits  for  the  period.  ,,..._ 

The  second  cross  entry  to  be  made,  therefore,  .s  deb.tmg 
Selling  Account  with  this  balance,  and  crediting  Loss  and  Gam 
,    Account  with  the  same,  with  the  result  of  closing  Selhng  Account 
and  putting  the  gross  profits  in  Loss  ar.d  Gain  Accovmt. 

No  business  cleans  up  at  the  face  of  the  accounts,  and  there 
fore,  where  actual  profits  are  to  be  declared  in  a  gomg  business 
some  allowance  must  be  made  for  bad  debts  and  for  such  ..ems  as 
rebates  and  allowances.    In  a  manufacturing  busmess  .here  .s  also 
the  depreciation  of  manufacturing  plant  .0  be  cons.dered,  and  m 
a  mercantile  business  the  depreciation  of  store  fixtures,  whde  .n 
all  lines  of  business  .here  is  the  depreciation  of  omce  f.,rmture  and 
similar  articles.    What  may  be  called  the  wear  and  tear  of  these 
lis  is  an  expense  to  the  business,  and  as  we  ^^^^^^^^'^ 
shown  good  accounting  demands  that  expenses  be  kept  up  to 
date  a  lu  times.    It  is  to  be  supposed,  therefore,  in  the  make-up 
of  the  account  produced  by  the  journal  and  other  records,  wh.ch 
have  been  summarised  and  entered  in  the  Private  Ledger,    ha 
in  Expenses  have  been  included,  for  example,  a  proper  percentage 


"^  n  '^,-\i 


jSTWiBWTBiwibiitfBW 


MM 


ACCOUNTIXO  SYSTEM 


100 


;  are  simply 
;h  this  daily 
Hints  in  the 

vate  Ledger 
;  business  at 
e  first  broad 
le  cost  of  the 
This  is  thv 
rewith.  The 
alance  repre- 
.s  the  further 
ch  represents 

e,  is  debiting 
,oss  and  Gain 
Uing  Account 
Lint. 

Its,  and  there- 
oing  business, 
such  items  as 
ss  there  is  also 
sidered,  and  in 
tures,  while  in 
e  furniture  and 
d  tear  of  these 
lave  elsewhere 
be  kept  up  to 
in  the  make-up 
records,  which 
:e  Ledger,  that 
)per  percentage 


on  in,..ln.e„.  sales  for  bad  debts,  toucher  with  rebates  and  a 
p  o     r  percentage  lor  tbe  period  .or  tbe  depreeintu.n  on  the  ,nan- 
, Lrturlng  plant,  store  fixtures,  e.e.,  so  tbat  tbe  tota  expanse 
tbe  business  are  eorrectly  represented  in  the  balanee  of  Expense 
Account  Ledger,  as  shown.  .     * 

The  next  cross  entry  to  be  made,  then,  is  debitrng  Loss  and 
Gain  Account  with  the  expenses  of  doing  business  to  date,  and 
crediting  the  sar.c  to  Expense  Account,  thereby  closmg  Ex- 
pense Account  and  showing  by  the  balance  in  Loss  and  Gam  Ac- 
count the  net  profits  to  date. 

Whatever  actual  losses  have  been  made  in  the  busmess  dur- 
ing the  period,  such  as  destruction  of  property,  etc.,  would  o 
course  be  entered  upon  the  principal  books  of  the  business  and 
come  forward  in  the  periodical  report.     Nothing  of  this  kmd, 
however,  is  shown  in  the  example  which  we  have  presented      En- 
tries affecting  the  Reserve  Funds  would  also  be  made  &t  the  end 
of  the  month.     Therefore  the  next  cross  entry  to  be  made  m  the 
Private  Ledger  and  Balance  Sheet  has  only  to  do  with  the  bal- 
ance in  the  Loss  and  Gain  Account  as  we  find  it. 

We  debit  Loss  and  Gain  Account  with  the  balance  and  open 
Dividends  and  Divisions.     We  will  suppose,  for  the  moment, 
that  the  net  profits  of  the  business  are  to  be  allowed  to  accumu- 
late in  the  account  termed  Impairment  and  Surplus.    We  there- 
fore close  Dividends  and  Divisions  by  another  cross  entry,  which 
transfers  the  amount  to  the  credit  of  Impairment  and  Surplus 
Account,  which,  as  will  be  seen  by  the  printed  heading  in  the  Pri- 
vate Ledger,  is  entitled  Undivided  Profits.     Here  the  amount 
would  stand  until  changed  by  the  addition  of  other  profits,  or  un- 
til reduced  by  losses,  or  until,  by  formal  action,  incorporated 
into  the  capital  account. 

If,  instead  of  carrying  all  the  profits  to  the  credit  of  Impair- 
ment and  Surplus,  a  portion  of  them  is  to  be  distributed  m  divi- 


I  I 


no 


TUE    SELF-PROVIXO 


(lends,  or  if  a  portion  is  to  be  transferred  to  the  credit  of  the  Pro- 
prietor's Account,  or  to  the  credit  of  the  accounts  of  the  several 
partners,  then  an  entry  would  be  made  in  the  journal  in  regular 
course,  giving  the  proper  accounts  in  the  divisional  ledgers  the 
stipulated  credits,  which  amounts  coming  forward  in  the  next 
daily  or  other  periodical  summary  of  transactions  would  have  the 
effect  of  debiting  Dividends  and  Divisions  with  the  amount  of 
the  transfer,  thus  leaving  a  smaller  amount  of  net  profits  to  be 
carried  to  the  Impairment  and  Surplus  Account,  in  the  way  above 
described.  When  the  business  is  running  at  a  loss,  as  various 
lines  of  business  will  at  certain  seasons  of  the  year,  the  loss  made 
will  appear  in  the  debit  column  of  Impairment  and  Surplus.  A 
credit  balance  in  Impairment  and  Surplus  Account  stands  for  an 
accretion  in  the  business,  while  a  debit  balance  in  that  account 
shows  an  impainnent  of  capital. 

Finally,  after  all  these  cross  entries  have  been  made,  those 
accounts  which  balance  should  be  closed  by  drawing  footing 
lines.  The  balances  in  the  other  accounts  should  be  thrown  out 
into  the  balance  columns  provided  for  the  purpose.  There  will 
then  be  left  in  the  Private  Ledger  a  balance  sheet  of  the  business 
at  this  date  as  follows: — 


^iaSSU 


of  the  Pro- 
the  several 
.1  in  regular 
ledgers  the 
in  the  next 
tld  have  the 
amount  of 
rofits  to  be 
e  way  above 
,  as  various 
e  loss  made 
surplus.  A 
tands  for  an 
liat  account 

made,  those 
ing  footing 
thrown  out 
There  will 
the  business 


**T 


3,501.88 

1.84793 

3,656.86 

335.00 

675.00 

1.372.45 

66.415.00 

175,704.1a 

175,704.13 

ACCOrXTlNO    HYSTEM 

RESOURCES: 

Cash S3I.34 

Hank "-J-JO^S 

Manufacturing i,7"o.oo 

Buying 10,610.36 

Instalment  Ledger 35.*')4.7« 

Sundry  Debtors 3,60228 

Notes  Receivable 3.'}75oo 

Investments ; 

Necessary 4.&5000 

Speculative 13,200.00 

LIABILITIES : 

Purchase  Accounts 

Sundry  Creditors 

Notes  Payable 

Investments  Reserve 

Collections  Reserve 

Impairment  and  Surplus 

Capital 


Balance  Sheet  of  the  Business  after  making  the  Cross  Entries. 

The  proof  of  the  correctness  of  the  work  in  the  Private 
Ledger  is  obtained  by  adding  the  debit  balances  together  and  the 
credit  balances  together,  as  shown  in  the  proof  columns,  just  the 
same  as  with  an  ordinary  balance  sheet.  The  Total  Balance  col- 
umns shown  in  the  sample  pages  may  be  used  for  purposes  of 
summary,  at  the  option  of  the  accountant. 

The  cross  entries  in  the  Private  Ledger,  as  before  remarked, 
may  be  made  at  as  frequent  intervals  as  is  desired,  and  if  re- 
quired they  may  be  made  at  irregular  intervals.  With  a  proper- 
classification  of  accounts  maintained,  and  with  everything  kept 
strictly  up  to  date,  the  Private  Ledger  is  always  ready  for  the 
cross  entries  here  illustrated. 

The  advantage  to  the  business  man  of  having  before  him 
such  a  thermometer  of  his  business,  showing  the  rise  and  fall  of 


I 


mBom^mmmei 


in 


»t 


THB    HKM'-I'HUVINO 


T 


his  profit  account,  or  such  a  haromcter  pointing  out  the  weather 
conchtions  ahead  from  time  to  time  as  the  Private  Ledj^er,  are 
too  evident  to  rerpiire  extended  arj:;umcnt.  The  accuracy  of  re- 
sults shown  l)y  the  Private  Ledger  and  Balance  Sheet  depend!* 
alone  upon  the  thorouj^hness  with  which  the  hookkeepini^  sys- 
tem is  planned  and  administered  in  the  jjencral  office.  All  the 
secrets  of  the  husincss,  as  it  will  l)e  seen,  are  kept  in  the  prnate  j 
office,  and.  further,  the  private  ofVice  is  always  in  position  to  de- 
termine the  relative  profitableness  of  the  husincss  heinn  con-  , 
ducted  without  any  assistance  from  the  general  ofTice  force.  At 
the  same  time  the  private  office  is  in  most  excellent  position  to 
control  the  management  of  the  general  office. 

Some  of  the  minor  advantages  to  be  derived  from  the  use  of 
the  Private  Ledger  and  Perpetual  Balance  Sheet  may  be  enumer- 
ated in  this  connection.  Taken  in  conjunction  with  the  daily 
report,  which  furnishes  the  amounts  to  be  posted  to  it.  the  Pri- 
vate Ledger  and  Balance  Sheet  affords  the  proprietor  or  manag- 
ing man  the  foundation  of  a  definite  demand  upon  the  account- 
ing department  of  the  establishment  for  all  the  detaikd  informa- 
tion that  may  be  required.  Whatever  is  wanted,  the  demand  for 
it  reaches  the  bookkeeper  in  a  form  to  be  understood  and  to 
afford  him  a  skeleton  upon  which  to  work.  It  also  affords  the 
managing  man  a  basis  for  checking  the  daily  work  of  the  book- 
keeping department.  An  error  cannot  exist  in  any  of  the  auxil- 
iary books  without  its  presence  becoming  manifest  to  the  one  in 
charge  c  f  the  Private  Ledger.  The  daily  report  will  always  indi- 
cate th  '  the  accounts  are  or  are  not  in  balance,  and  therefore  it 
is  equiv  lent  to  a  daily  trial  balance  of  all  the  books.  At  the 
same  time  it  is  accomplished  without  any  of  the  labor  accompany- 
ing the  trial  balance  as  usually  taken. 

The  use  of  the  Private  Ledger  also  affords  the  bookkeeper 
the  opportunity  of  showing  when  his  work  is  done  and  up  to  date. 


4i^ 


J 


the  weather 
Ledger,  are 
curacy  of  re- 
lieet  depends 
:keepiiif;'  sys- 
ice.  All  the 
n  the  private 
)sition  to  de- 
s  heiii^  coii- 
ce  force.  At 
it  position  to 

>m  th*  use  of 
y  be  enunier- 
ith  the  daily 
o  it,  the  Pri- 
or or  manag- 

the  account- 
likd  informa- 
e  demand  for 
stood  and  to 
.o  affords  the 

of  the  book- 
'  of  the  auxil- 
to  the  one  in 
11  always  indi- 
id  therefore  it 
loks.  At  the 
>r  accompany- 

le  bookkeeper 
nd  up  to  date. 


ACCorXTINO    SYSTEM 


113 


It  takes  him  out  of  the  rut  in  which  his  fellows  have  so  long  been 
laboring,  always  with  a  pile  of  unfinished  work  ahead,  and  divides 
Ws  duties  into  well  defined  sections,  each  of  which  may  be  com- 
pk  ted  by  itself.     A  day's  duties  become  definite,  and  when  once 
correctly  performed  leave  nothing  more  to  be  demanded.     The 
Private  Ledger  further  makes  it  impossible  for  the  bookkeeper 
to  conceal  even  a  small  error  in  any  of  the  auxiliary  books  or  to 
carry  it  along  from  week  to  week  and  month  to  month,  in  the 
hope  of  being  able  to  find  it  and  correct  it  before  discovery.     By 
the  plan  here  outlined  the  private  office  knows  of  the  error  be- 
fore the   bookkeeper.     Whatever  error  exists   is   instantly  re- 
vealed by  comparison  of  the  balance  in  the  divisional  ledger  with 
the  balance  in  the  corresponding  account  in  the  Private  Ledger. 
Under  proper  supervision,  therefore,  concealment  is  impossible. 
At  the  same  time  facilities  for  locating  the  error  are  many 
times  greater  than  those  supplied  by  the  usual  plans.     The  Pri- 
vate Ledger  affords  the  basis  of  checking  the  correctness  of  any 
portion  of  the  general  books  of  the  establishment  without  ex- 
amination of  any  other  part.     It  sectionalizes  the  bookkeeper's 
work,  so  that,  instead  of  having  to  climb  the  mountain  of  a  trial 
balance  of  all  the  accounts  on  the  first  day  of  every  month,  he 
may  prove  up  a  few  of  the  accounts  at  a  time  at  intervals  during 

the  month. 

The  daily  report  demanded  of  the  bookkeeper  gives  him 
a  standard  to  which  to  work.  In  turn,  it  affords  the  business 
man  a  standard  by  which  to  measure  the  bookkeeper's  work  and 
to  hold  him  to  it.  It  is  a  happy  measure  for  both,  and  consti- 
tutes a  bridge  across  the  chasm  of  misunderstanding  which  so 
often  separates  the  bookkeeper  from  the  man  for  whom  he  is 
faithfully  laboring. 


SELF  -PROVING    MERCANTILE    LEDGER 

The  Self-Proving  Mercanule  Ledger  is  composed  of  alternate 
wide  and  narrow  leaves,  with  the  wide  leaves  thickened  or  rein- 
forced where  they  extend  beyond  the  narrow  leaves  so  as  to  cause 
the  pages  of  the  book  to  lie  flat  under  all  circumstances.  This 
thickening  or  reinforcing  is  not  shown  in  the  miniature  fac  simile 
presented  herewith.  Each  section  of  wide  and  narrow  leaves  car- 
ries the  accounts  through  twelve  months  of  time. 

Each  monthly  space  is  divided  into  two  principal  parts, 
Debits  and  Credits.  The  debits  are  subdivided  into  columns 
headed  "Balance  from  Last  Month"  and  "Charges,"  with  pro- 
vision for  recording  the  date  of  the  sale  or  charge  and  the  page  of 
the  book  from  which  the  amounts  are  posted.  The  credit  column 
is  similarly  provided  with  spaces  for  noting  the  dates  of  the  credit 
items  and  the  pages  of  the  book  from  which  they  are  posted.  - 

The  Self-Proving  Mercantile  Ledger,  as  usually  constructed, 
has  fifty  lines  to  the  page,  numbered  in  the  margins  of  the  narrow 
pages,  and  down  the  centers  of  the  wide  pages.  In  the  first  sec- 
tion in  the  book  the  lines  are  numbered  from  CO  to  49  inclusive, 
and  in  the  second  section  from  50  to  99  inclusive.  All  the  other 
sections  throughout  the  book  are  similarly  numbered  and  ar- 
ranged alternately.  The  line  numbers  are  to  be  read  in  connec- 
tion with  the  page  numbers,  as,  for  example,  page  8  and  line  25 
would  read  825,  thus  instantly  locating  the  portion  of  the  book 


^fitt'iUf yifji  trnttm 


«i'W**.t(^»:nk,'; 


C-^-wW"--^ 


ACCOrXTIXG    SYSTEM 


115 


EDGER 

sed  of  alternate 
;kened  or  rein- 
s  so  as  to  cause 
istances.     This 
ature  fac  simile 
TOW  leaves  car- 
principal  parts, 
i  into  columns 
jes,"  with  pro- 
and  the  page  of 
,e  credit  column 
tes  of  the  credit 
re  posted.  - 
lly  constructed, 
is  of  the  narrow 
In  the  first  see- 
to  49  inclusive, 
.     All  the  other 
nbered  and   ar- 
read  ii;i  cdnnec- 
?e  8  and  line  25 
ion  of  the  book 


where  a  required  line  is  to  be  found.  The  page  numbers  are  re- 
stricted to  the  wide  pages,  and  are  used  in  double  pairs.  The  first 
two  pairs  of  facing  pages  are  numbered  0-0,  the  second  two  pairs 
i-i,  the  third  two  pairs  2-2,  &c.  In  connection  with  the  page 
numbers  there  are  small  figures  indicating  the  line  numbers  to  be 
found  on  the  pages  where  they  are  printed.  Thus,  in  the  fac 
simile,  there  appear  in  connection  with  the  page  number  8  small 
figures  reading  '•QO  to  49."  which  mean  that  all  the  numbers  from 
800  to  849  inclusive  are  to  be  found  on  these  pages.  The  next 
section  would  have  printed  after  the  8,  50  to  99  inclusive,  which 
would  mean  that  all  the  numbers  commencing  with  850  and  end- 
ing with  899  are  to  be  found  on  the  pages  so  labelled. 

The  Self-Proving  Mercantile  Ledger  is  furnshed  with  an  in- 
dex, the  figures  of  which  are  marginally  printed  on  the  wide  pages. 
Opposite  the  figures  thus  printed,  but  on  successive  leaves,  are 
placed  blank  tags,  so  located  that  any  required  page  may  be  in- 
stantlv  turned  to  by  putting  the  finger  under  the  tag  and  opening 
the  book  at  that  point.  The  index  figures  are  printed  on  the 
margins  of  both  right  and  left  hand  pages,  and  the  t?gs  are  so 
arranged  that  they  may  be  used  in  turning  to  the  required  page 
either  from  the  front  part  of  the  book  toward  the  back  or  from 
the  back  toward  the  front.  Thus,  by  using  the  tag  opposite  800, 
whatever  may  be  the  position  of  the  book  at  the  time,  it  will  be 
opened  to  the  pages  shown  in  the  illustration. 

Inasmuch  as  space  for  several  accounts  is  provided  on  each 
page,  the  accounts  are  indexed  by  numbers  and  not  by  pages. 
Thus,  in  the  illustrations  given  in  the  fac  simile.  Black  &  Gray  are 
No.  800,  John  Smith  is  No.  815.  Robert  Curtis  is  825,  and  George 
Thompson  is  835.  These  numbers  would  be  used  instead  of 
pages  in  indexing  the  accounts.  If  we  wanted  find  John  Smith's 
account  we  would  first  turn  to  the  index,  where  it  would  be  re- 
corded as  815.     Then,  placing  the  finger  under  tag  800,  as  pre- 


■  ■■:*t'«*^.^;.,o-c!A:' 


110 


THE    SELF-PROVING 


viously  described,  we  would,  with  a  single  motion,  open  the  book 
to  the  pages  shown  in  the  fac  simile.     Then,  running  down  the 
line  numbers  to  1 5.  we  would  find  John  Smith's  name  there  wntien. 
In  opening  the  accounts  in  the   Self-Proving   Mer.antde 
Ledger  so  much  space  vertically  is  allotted  to  an  account  as  it  is 
estimated  the  transactions  with  the  customer  will  reqmre.      In 
other  words,  as  many  lines  are  allotted  to  each  account  as  the  es- 
ti.nated  maximum  number  of  entries,  either  debit  or  credit,  for  a 
single  month.     Thus,  in  opening  the  account  with  Black  &  Gray 
we  have  estimated  that  at  most  they  would  nev-^r  require  over  fif- 
teen lines,  and,  therefore,  that  number  has  been  allotted  to  them. 
John  Smith  has  been  allotted  ten  lines  and  Robert  Curtis  also  ten 

lines. 

Accounts  are  opened  by  transferring  from  the  previous  ledger 
as  indicated  in  the  example  of  Black  &  Gray.     Their  account,  as 
is  recorded,  is  brought  forward  from  Ledger  F,  page  957-    The  bal- 
ance with  which  the  old  account  closed  was  Dr.  ?32542,  which  is 
put  in  the  balance  column  of  the  January  period.     Then  the  aebit 
entries  in  the  account  are  posted  as  they  occur.     By  referring  to 
the  items  it  will  be  seen  that  this  firm  bought  goods  at  frequent 
intervals  during  the  month  of  January,  commencing  on  the  2d,  and 
ending  on  the  31st.     The  credits  are  similarly  posted  in  the  order 
in  which  they  occur.    Thus,  on  the  6  ,1  of  January,  Black  &  Gray 
paid  the  balance  owing  from  the  previous  month,  $325.42.      On 
the  15th  of  January  they  remitted  $265.50,  paying  for  their  bills 
from  the  2d  to  the  13th  inclusive. 

In  using  the  Self-Proving  Mercantile  Ledger,  wherever  a 
credit  posting  exactly  balances  a  debit  posting,  or  the  amount  of 
several  debit  postings,  it  is  very  convenient  to  indicate  that  fact 
bv  making  a  short  horizontal  pen  mark  through  the  vertical  ruling 
CO  the  right  of  the  cents  columns  and  directly  below  the  amounts 
which  balance.     Thus,  it  will  be  noticed  that  under  the  amount 


;n  the  book 
g  down  the 
lere  written. 
Mercantile 
ount  as  it  is 
squire.  In 
tit  as  the  es- 
credit,  for  a 
lack  &  Gray 
uire  over  lif- 
ted to  them, 
irtis  also  ten 

jvious  ledger 
r  account,  as 
57.    Thebal- 
;.42,  which  is 
lien  the  debit 
7  referring  to 
s  at  frequent 
m  the  2d,  and 
1  in  the  order 
Black  &  Gray 
325.42.      On 
for  their  bills 

r,  wherever  a 
the  amount  of 
icate  that  fact 
vertical  ruling 
V  the  amounts 
zr  the  amount 


ACCOUNTING    SYSTEM 


■:i^ 


brought  forward  from  the  previous  month,  $32542,  such  a  mark 
hrsb'een  made,  and  also  under  the  payment  of  the  6th  of  Janu^y 
for  like  amount,  because  these  balance  or  offset  each  other. 
Again,  under  the  last  bill  paid,  in  the  remittance  made  on  the  1 5th 
a  Lilar  marks  occurs,  and  likewise  under  the  payment.     By  thi 
plan  it  is  shown  at  the  end  of  the  month  that  Black  &  Gray  owe 
only  for  the  bills  commencing  January  15  and  running  to  the  end  . 
of  the  month.     It  is  not  necessary  to  go  over  the  whole  account^ 
These  items  are  footed  and  the  amount,  $651.95,  is  earned  forward 
into  the  balance  column  for  February. 

The  February  charges  are  posted  as  they  occur,  and  also  the 
credits  as  they  occur.     By  examination  it  appears  that  on  the  5th 
of  February  Black  &  Gray  paid  their  January  balance.     The  credit 
item  is  posted,  and  the  mark  indicating  the  balance,  already  re- 
ferred to,  is  placed  under  both  debit  and  credit  amounts.     An  in- 
spection of  the  February  account  at  the  close  of  the  month  shows 
^hat  all  bills  bought  in  that  month  are  yet  to  be  P-^       ^^^ 
amounts  are  accordingly  footed  and  carried  "  ^^^  f 
March  account,  $926.78.    The  March  purchases  are  posted  in  the 
order  of  their  occurrence,  and  likewise  the  credits^    On  the  4th  of 
March  th^s  firm  remit  $500  on  account.     On  the  7th  of  Ma^ch 
they  send  $426.78.  making,  with  the  $500  previously  remitted,  a 
payment  in  full  of  the  balance  owing  the  first  of  the  month.     The 
horizontal  mark  indicating  a  footing  is  then  placed  directly  below 
the  line  of  the  second  payment  and  also  under  the  amount  of  the 
balance     On  the  23d  of  March  this  firm  remit  $818.40  m  payment 
of  the  bills  bought  during  the  month  up  to  the  i6th  inclusive 
The  presence  of  the  short  horizontal  mark  under  the  amount  of 
the  last  bill  and  under  the  remittance  indicates  to  the  bookkeeper, 
when  it  comes  time  to  carry  balances  forward,  that  only  that  por- 
rion  of  the  account  below  the  horizontal  line  in  the  Charge  column 
tobeconsidered.    The  bills  commencing  March  ,8andrunning 


118 


THE    SELF-PROVING 


1 


to  March  31  inclusive  are  then  footed,  giving  the  balance  with 
which  the  April  account  comences,  $784.72. 

During  the  month  of  April  it  will  be  seen  that  payments  are 
made  to  balance  the  amount  brought  forward  from  the  previous 
month,  and  also  each  of  the  bills  bought  during  the  month,  with 
the  exception  only  of  the  bill  April  30,  $187.50,  which  is  carried 
forAvard  and  opens  the  account  for  May. 

On  May  6  a  check  is  remitted  for  the  amount  brought  for- 
ward from  the  previous  month.  On  May  12  a  check  is  remitted 
for  the  bill  of  May  4.  Horizontal  marks  of  the  kind  above  re- 
ferred to  are  put  in  place,  thereby  showing  to  what  extent  the  ac- 
count has  been  balanced.  On  May  21  $800  is  remitted  on  ac- 
count, and  on  May  25  $200  on  account.  These  amounts  do  not 
exactly  offset  anything  in  the  debits,  and.  therefore,  in  balancing 
the  account  this  month,  the  bills  from  the  6th  to  the  30th  in- 
clusive are  footed,  and  the  $1,000  substracted,  giving  a  balance  of 
$499.39  to  be  carried  forward. 

The  charges  for  goods  bought  in  June  are  made  in  regular 
course,  and  the  credits  as  well,  as  the  remittances  come  in.  In 
this  month  it  will  be  noticed  that  three  remittances  of  $500  each 
are  made,  which  do  not  evenly  balance  any  amount  of  either  the 
balance  brought  forward  or  charge  made  or  combinations  of  the 
two.  Accordingly,  in  this  case,  in  striking  the  balance,  the  book- 
keeper foots  the  balance  from  the  last  month,  together  with  the 
charges  for  June,  and  substracts  the  total  of  the  remittances,  carry- 
ing forward  the  balance  into  July,  $296.24. 

The  other  entries  in  the  account  of  Black  &  Gray  are  self-ex- 
planatory. In  September  it  will  be  seen  that  this  firm,  after  re- 
mitting on  the  6th  for  the  balance  brought  forward  from  the  last 
month,  sent  on  September  12  a  remittance  for  the  bill  of  Septem- 
ber 4,  ignoring  the  bill  of  September  2.  Again,  on  September  19, 
they  send  a  remittance  that  differs  slightly  in  amount  from  the  ag- 


linmiiiiigMta 


— :-  'T, 


lance  with 

yments  are 
le  previous 
lonth,  with 
ii  is  carried 

rouglit  {or- 
is remitted 

I  aljove  re- 
tent  the  ac- 
tted  on  ac- 
Lints  do  not 
n  balancing 
he  30th  in- 
a  balance  of 

e  in  regular 
ome  in.  In 
){  $500  each 
3f  either  the 
itions  of  the 
:e,  the  book- 
her  with  the 
ances,  carry- 

y  are  self-ex- 
irm,  after  re- 
from  the  last 

II  of  Septem- 
eptember  19, 

from  the  ag- 


I 


ACCOUNTING    SYSTEM 


m 


eregate  of  several  biUs  which  i.  may  be  presumed  they  n.ended 
fo  cover  by  their  remittance.  In  these  cases,  tnasmttd  as  he 
amot-nts  do  not  balance,  the  horizontal  lines  are  om.tted  and  a 
Tend  of  the  month  all  the  items  debit  are  footed,  and  all  the 
teL  credit  are  similarly  footed,  and  the  balattce  ^'-k  -rym^ 
forward  into  October  $48..o6.    F™"^' .^''^e    T  anK 

the  December  account  of  Black  &  Gray  ts  balanced  n  the  same   _ 
genera,  way  as  we  have  described,  carrying  forward  mto  Ledger 
H  and  to  hne  629  of  the  accounts  for  .897  the  balance,  $44t  ■69- 

John  Smith,  whose  account  occurs  on  line  8.5,  .s  a  new  cus- 
tomer  of  the  house,  buying  his  first  biUJanuary  .5.  Hedoesbus,- 
ness  through  a  period  of  two  months  only,  and,  as  h,s  account 
shows,  is  accorded  a  very  small  line  of  credit. 

Robert  Curtis,  whose  account  appears  on  line  825.  becomes 
a  customer  of  the  concern  in  March,  and  buys  on  thirty  days  t.me. 
By  examining  his  account  it  will  be  noticed  that  the  Ml  -March  7. 
J34.70,  is  paid  April  7,  and  that  the  bills  March  .8  and  27  are 
paid  April  18  and  27,  thus  closing  up  the  March  account.      These 
payments  balance  the  amount  brottght  forward  from  the  prev,ot« 
month,  $465.42,  and,  therefore,  the  horizontal  mark  -  pl-ed  be- 
low the  balance  amount,  and  also  below  the  last  of  the  three 
credits     The  two  bills  bought  in  April,  it  will  be  noticed,  are  sim- 
ilarly paid  in  May.    The  four  bills  bought  in  May,  amountmg  to 
$428.09,  are  paid  in  June  in  a  single  amount,  where  the  account  .s 

closed.  1-         Q-,r     K*. 

George  Thompson,  whose  account  appears  on  hne  »35.  "be- 
comes a  customer  of  the  house  in  October.  He  also  buys  on 
thirty  days'  time,  and  at  the  end  of  December  owes  the  concern 
$799^09,  which  balance  being  carried  forward  opens  his  account  in 

Ledger  H,  on  line  740.  „   ,  .•     » 

The  Mercantile  Ledger  is  self-proving  in  that  all  the  postmgs 

of  a  given  page  or  series  of  pages  collectively  can  be  footed  and 


u» 


THE    SEI-F-PROVING 


compared  in  a  way  to  demonstrate  the  accuracy  of  the  work,  or  to 
show  on  exactly  what  page  the  error  has  been  made,  in  case  it  is 
shown  that  an  error  exists.      For  example,  take  the  months  of 
May  and  June,  which  particular  months  are  selected  because  two 
accounts  run  through  this  period  of  time,  as  shown  in  the  minia- 
ture fac  simile.     If  the  f^rst  column  containing  the  balance  from 
last  month  is  footed,  and  if  the  charge  column  is  similarly  footed, 
and  the  two  amounts  are  added  together;  and,  in  turn,  if  the  credit 
column  is  footed  and  its  sum  is  substracted  from  the  total  of 
the  debits  just  mentioned,  th«  result,  if  the  work  is  correct,  will  be 
equal  to  the  total  of  the  balances  with  which  the  June  account  is 
opened.     The  principle  and  method  of  proving  just  described  are 
the  same,  irrespective  of  the  number  of  accounts  to  the  page,  and 
enable  the  bookkeeper  to  so  sectionaUze  his  work  as  to  know  at 
once,  in  case  a  mistake  is  made,  just  where  to  look  for  it  without 
the  tedious  process  of  checking  back  or  duplicate  posting. 

In  mercantile  estabUshinents  where  monthly  statements  are 
regularly  rendered  to  customers    the  Self-Proving  Mercantile 
Ledger  readily  lends  itself  to  the  special  requirements  of  the  case. 
For  example,  take  the  account  of  Black  &  Gray  for  the  month  of 
May.      As  the  postings  have  proceeded  during  the  month,  the 
horizontal  marks  denoting  settlements  have  been  made  as  pre- 
viously described.  Inspection,  therefore,  shows  that  the  statement 
must  contain  the  charges  commencing  with  May  6  and  ending 
May  30,  together  with  the  credits  May  21  and  25.     Accordingly, 
it  is  so  made  out.     V'heii  it  is  completed   the  balance  which  it 
shows,  $499.39,  is  carried  into  the  June  column  on  the  ledger  page. 
In  the  same  way,  the  account  of  Robert  Curtis  would  show  that 
all  the  purchases  made  for  the  month  of  May  are  to  be  included 
in  the  statement,  the  remittances  made  during  the  month  having 
balanced  the  amount  brought  forward  from  the  previous  month. 
When  the  statement  is  completed  its  amount  is  Hkewise  carried 


e  work,  or  to 
I,  in  case  it  is 
le  months  of 

because  two 
in  the  minia- 
balance  from 
lilarly  footed, 
1,  if  the  credit 

the  total  of 
orrect,  will  be 
ine  account  is 
described  are 
the  page,  and 
as  to  know  at 
for  it  without 
isting. 

itatements  are 
ig  Mercantile 
Its  of  the  case. 
■  the  month  of 
he  month,  the 

made  as  pre- 
;  the  statement 

6  and  ending 

Accordingly, 

ilance  which  it 

he  ledger  page. 

ould  show  that 

to  be  included 
;  month  having 
revious  month, 
likewise  carried 


MINIATURE    FACSIMILE 


OF   THE 


SELF-PROVING    MERCANTILE    LEDGER 


WITH    ENTRIES 


(SEE  PAGE  1 14) 


Copyright  1897 

BV  A.  O.  KiTTRBDGE  AND 
E.  R.  KiTTRKDGE 


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r>a^Aj&f<i^.»>us''v!>v}si;KmaRagfegar/j^H^^ 


nr-' 


liii"y'i--r^ffti 


ACCOUNTING    SYSTEM 


121 


into  the  balance  column  of  the  June  account,  and  all  other  open 
accounts  take  the  same  course.  Then,  by  applying:  the  system  of 
pcoof  above  mentioned,  before  the  statements  are  mailed,  the 
bookkeeper  is  afforded  the  assurance,  not  only  that  the  ledger 
work  is  correct,  but  that  the  statements  have  been  sent  out  free 

from  error. 

Wherever  a  trial  balance  is  required  for  the  purpose  of  sum- 
marizing the  transactions  or  arranging  a  statement    it  may  be 
taken  oflf  the  Self-Proving  Mercantile  Ledger  in  the  usual  manner, 
but  a  trial  balance  is  unnecessary  so  far  as  proving  the  correctness 
of  the  book  is  concerned.     The  arrangement  of  accounts  in  the 
ledger,  as  already  described,  provides  other  and  better  means  of 
proving.     A  monthly  summary  sheet  may  be  used  for  recapitulat- 
ing the  balances  taken  by  the  ledger  pages  in  case  a  total  is  wanted 
in  that  form,  or  with  an  adding  machine,  Uke  the  Comptometer, 
these  balances  may  be  tallied  of¥,  account  by  account,  or  page  by 
page,  as  may  be  preferred,  in  a  small  fraction  of  the  time  that  the 
summary  would  require,  thus  reaching  an  amount  as  a  balance  to 
correspond  with  the  balance  in  Dealers'  Ledger  or  Sundry  Debt- 
ors' Ledger  account,  by  whatever  name  called,  in  the  Private 
Ledger  or  General  Ledger. 

The  Self-Proving  Mercantile  Ledger,  as  here  shown,  is  ruled 
without  a  column  for  "Items."  Where  an  item  column  is  desired 
a  special  book  is  provided,  other  features  remaining  the  same  as  in 
the  fac  simile  here  presented.  It  is  very  generally  the  rule  to  as- 
sume that  all  charges  are  for  merchandise,  unless  otherwise  speci- 
fied. Therefore,  when  a  special  charge  occurs,  Uke  Interest  or 
Cash,  or  Note  Returned,  it  is  indicated  by  an  initial,  or  by  some 
code  mark  in  connection  with  the  amount  in  the  charge  column. 
For  example,  an  asterisk  (*)  might  stand  for  Interest,  a  dagger 
(t)  for  Cash,  and  a  double  dagger  (t)  for  Note,  and  so  on.  In  the 
same  way,  on  the  credit  side,  it  is  very  generally  assumed  that  un- 


i   1 

Imii 


"^m 


mm 


iigllJS^k'- 


J22  THE    SELF-PROVING 

less  otherwise  specified,  the  credits  are  all  cash  payments.  Credits 
other  than  cash  might  similarly  be  indicated  by  a  code  of  marks. 
A  double  dagger  (t)  might  stand  for  Note  or  Acceptance,  a  section 
mark  (0  for  goods  returned,  and  so  on. 

The  Mercantile  Ledger  is  self-proving  in  addition  to  what  has 
been  said  above  with  reference  to  page  balances  in  that  all  the 
posting  of  a  month  (debits)  may  be  collected  together,  either  by 
footing  the  several  pages  in  the  ordinary  way  or  by  tallying  ofif  the 
amounts  on  a  Comptometer.     Thus,  if  all  the  charges  posted  to  a 
ledger  in  a  month  are  for  merchandise,  then  the  total  of  the  debit 
column  should  agree  with  the  sales  book,  and  if  all  the  credits  for 
the  month  are  cash,  then  the  total  of  the  credit  postings,  taken  in 
the  same  manner,  should  agree  with  the  cash  book.     By  first  pick- 
ing out  the  items  which  are  indicated  by  the  code  as  belonging  to 
other  classes,  the  debit  postings  would  be  separated  into  several 
amounts,  corresponding  with  (i)  cash  entries,  (2)  sales  book,  (3) 
notes  returned,  &c.,  and  the  credit  postings  into  amounts  corre- 
sponding with  ( I )  cash  book,  (2)  bill  book,  &c. 

It  sometimes  occurs,  although  not  illustrated  in  the  fac  simile 
here  presented,  that  a  customer  remits  more  than  he  owes  at  the 
time,  and  that  accordingly  the  balance  carried  forward  to  the  new 
month  is  a  credit  balance  instead  of  a  debit  balance.  Irregulari- 
ties of  this  kind  are  very  easily  managed  by  establishing  the  rule 
to  write  all  credit  balances  in  red  ink.  Then,  in  proving  the 
ledger,  the  credit  balances  are  taken  by  themselves,  and  are  sub- 
tracted from  the  grand  total. 

The  history  of  a  customer's  transactions  with  the  house  af- 
forded by  the  pages  of  the  Self-Proving  Mercantile  Ledger,  as  in- 
dicated by  the  account  with  Black  &  Gray,  in  the  fac  simile  pre- 
sented herewith,  is  of  the  greatest  value  to  the  business  mUn.  No 
trial  balance  can  compare  with  it  in  this  respect,  and  the  old  form 
of  ledger  cannot  be  made  to  show  the  course  of  the  account  or  of 


s.  Credits 
e  of  marks. 
;e,  a  section 

to  what  has 
that  all  the 
;r,  either  by 
lying  off  the 
posted  to  a 
of  the  debit 
e  credits  for 
igs,  taken  in 
iy  first  pick- 
)elonging  to 
into  several 
les  book,  (3) 
ounts  corre- 

the  fac  simile 

:  owes  at  the 

■d  to  the  new 

Irregwlari- 

hing  the  rule 

proving  the 

and  are  sub- 

the  house  af- 
Ledger,  as  in- 
;ac  simile  pre- 
ess  mSin.  No 
i  the  old  form 
account  or  of 


ACCOUNTING    SYSTEM 


m 


a  number  of  accounts  in  nearly  so  satisfactory  a  manner.  When 
the  Self-Proving  Mercantile  Ledger  is  used  as  an  element  of  an 
accounting  system  in  which  the  collective  ledger  becomes  a  per- 
petual balance  sheet,  the  necessity  of  the  trial  balance,  with  its  per- 
plexing errors  in  additions  in  transferring  amounts  from  the 
ledger,  in  getting  items  into  the  wrong  column,  and  all  the 
other  errors  with  which  accountants  are  familiar,  is  entirely  re- 
moved. 


THE    INSTALMENT    LEDGER 

The  ledger  used  in  the  Self-Proving  Accounting  System  for 
keeping  the  instalment  accounts  is  composed  of  sections,  each  hav- 
ing two  wide  pages  and  ten  narrow  pages.  Each  of  the  narrow 
pages  and  a  space  of  equal  width  on  each  of  the  two  wide  pages  are 
devoted  to  the  transactions  of  a  month.  A  section,  therefore,  cov- 
ers a  year. 

The  ledger  is  constructed  upon  the  line  account  principle. 
The  customers'  names  are  entered  in  a  space  provided  for  the  same 
at  the  left  of  the  first  wide  page  of  the  section.     Each  customer's 
account  is  restricted  to  a  single  line.     In  each  monthly  period 
there  is,  first,  a  space  for  the  Balance  brought  forward  from  the 
preceding  month,  and,  second,  for  a  charge  of  Merchandise  or  In- 
terest, or  both.     Then  follow  five  spaces  for  recording  Payments, 
with  their  Dates.     A  column  is  next  provided  for  the  Total  Cash 
credits,  and  then  a  space  is  allowed  for  Sundry  Credits,  such  as  Al- 
lowances, Bad  Debts,  Goods  Returned  or  Notes.    The  entries  as 
they  occur  are  posted  for  the  first  month,  and  then  the  balance  in 
the  account  is  struck  and  the  amount  carried  forward  to  the  first 
space  in  the  succeeding  month,  when  the  operation  is  repeated. 

With  the  accounts  arranged  in  this  manner,  in  horizontal 
spaces,  following  in  succession  down  the  page,  it  is  possible  to  foot 
separately  the  several  columns  in  each  monthly  division,  thereby 
showing  the  total  of  the  charges  and  the  total  of  the  credits  that 
have  been  posted  to  each  page,  and  by  combining  the  footings  of 
the  pages— to  show  the  total  of  the  postings  to  the  entire  ledger 


System  for 
IS,  each  hav- 

the  narrow 
ie  pages  are 
irefore,  cov- 

it  principle, 
for  the  same 
1  customer's 
ithly  period 
ird  from  the 
mdise  or  In- 
g  Payments, 
»  Total  Cash 
5,  such  as  Al- 
he  entries  as 
tie  balance  in 
d  to  the  first 
repeated, 
in  horizontal 
issible  to  foot 
sion,  thereby 
;  credits  that 
le  footings  of 
entire  ledger 


ACCOUNTING    SYSTEM 


125 


,„r  each  month.     By  footing  the  firs.  col„„,n,  "Ba  ance  Iron,  la 
month."  there  U  given  as  .he  rest,,,  the  .o.a,  o.  .he  ha hutce 
brought  forward,  or  the  total  of  the  amount  owmg  by  .he  cus.o 
mers  a.  .ha.  da.e.    By  foo.ing  .he  amoun.  of  Merchand.se  and 
Interes.  charged  there  is  obtained  a  sum  which  represents    he 
total  that  has  been  posted  to  the  customers'  accounts  for  .he 
mon.h.     If  .hese  .wo  amoun.s-namely,  the  total  of  the  balances 
owing  at  the  beginning  of  the  month,  and  the  total  tha.  has  been 
charged  during  the  mon.h-are  added  .ogether  and  tf  from  tha 
amount  .here  is  sub.rac.ed  the  total  of  the  cred,.  columns  for  the 
mon.h.  then  the  remainder  will  be  the  .o.al  of  .he  balances  to  be 
carried  forward  to  the  succeeding  month.    When  the  balances 
have  been  carried  forward  .hey  are  footed  and  the  amotmt  com- 
.    pared  with  that  determined  by  .he  other  plan.    By  th.s  method, 
therefore,  the  ins.almen.  ledger  is  self-proving,  no.  only  when 
.aken  as  a  whole,  but  also  when  taken  page  by  page  and  month  by 
month.    A  ht.le  fur.her  on  in  .his  account  we  shall  explan,  stdl 
other  features  of  proof,  indicating  the  means  of  checking  w.th  the 
sales  book  and  cash  book. 

The  footings  of  the  several  columns  of  a  given  month  may  be 
carried  forward  from  the  first  section  to  the  second,  and  tn  turn 
from  the  second  to  the  third,  and  so  on.  or  the  pages  may  be  footed 
separately  and  then  may  be  summarized  or  totalled  m  a  special 
book  provided  for  the  purpose. 

The  faint  lines  of  the  pages  are  numbered,  on  the  broad  pages 
and  also  on  the  margins  of  the  several  narrow  pages.  Each  tenth 
number  is  distinguished  by  size  or  face  of  type,  and  each  fifth  Ine 
is  distinguished  by  the  thickness  of  the  Une.  or  by  color.  The  hne 
numbers  are  to  be  read  in  connection  with  the  folios  or  page  num- 
bers Thus,  for  example,  if  the  book  is  opened  to  page  400,  and  a 
certain  account  is  on  line  18,  then  that  account  is  known  as  ac- 
count No.  418,  and  would  be  so  indexed.    The  famt  hues  run  fifty 


Tmssa»(b)fti»?ii»  t4i,ii/!-' 


IP" 


120 


THE    SBW'-PROVIXG 


1 


to  the  page.     In  the  first  section  they  are  from  o  to  49  inckisive, 
and  in  the  second  section  are  from  50  to  99  incKtsive.     They  con- 
tinue in  this  way  alternately  through  the  entire  book.     The  folios 
or  page  numbers  are  in  pairs  on  facing  pages,  and  advance  by 
fifties.     In  the  example  cited  above,  page  400,  the  line  numbers, 
being  read  in  connection  with  the  400,  give  accounts  400,  401,  402, 
and  so  on  in  regular  succession  to  449  inclusive.    The  next  pair 
of  pages  in  the  book  is  numbered  450,  which  also,  bdng  read  in  con- 
nection with  the  line  numbers,  give  accounts  450.  45 1.  ^"^  ^o  on  in 
regular  succession  to  499  inclusive.     Starting  the  line  numbers 
with  o  on  the  first  page  gives  even  fifties  and  even  hundreds  at  the 
tops  of  the  pages,  an  arrangement  that  greatly  facilitates  refer- 
ences. 

The  book  is  indexed  by  blank  tags  fastened  to  the  broad 
leaves  opposite  numbers  printed  in  series  in  the  margins  of  the 
leaves  corresponding  to  the  folios  or  page  numbers,  and  so  ar- 
ranged that  the  book  is  opened  to  any  required  page  by  lifting  the 
tag  opposite  the  number  corresponding  to  the  page  that  is 
wanted.  The  index  figures  are  printed  on  the  margins  of  both  the 
right  and  left  hand  pages,  and  the  tags  are  so  arranged  that  they 
may  be  used  in  turning  to  the  required  page  either  from  the  front 
part  of  the  book  toward  the  back  or  from  the  back  part  toward 
the  front.  Thus,  by  using  the  tag  opposite  400,  whatever  may  be 
the  position  of  the  book  at  the  time,  it  would  be  opened  to  the 
page  numbered  400. 

The  Self-Proving  Instalment  Ledger,  as  commonly  built,  has 
3,000  accounts  to  the  volume.  The  index,  for  convenience,  is 
divided  in  the  middle,  and  two  sets  of  tags  are  employed.  The 
first  set  is  used  for  opening  the  book  to  any  required  page  from  o 
to  1,450  inclusive,  and  the  second  set  from  1,500  to  2,999  inclusive. 
The  manner  of  using  the  Self-Proving  Instalment  Ledger  will 
be  better  understood  by  an  examination  of  the  accompanying 


jzrc: 


ACCOUNTING    SYSTEM 


tir 


^9  inclusive, 
They  con- 
The  folios 
advance  by 
le  numbers, 
50,401,402, 
le  next  pair 
read  in  cori- 
and  so  on  in 
ne  numbers 
idreds  at  the 
lltates  refer- 

0  the  broad 
rgins  of  the 
i,  and  so  ar- 
3y  lifting  the 
)age  that  is 
IS  of  both  the 
ed  that  they 
om  the  front 

part  toward 
tever  may  be 
pened  to  the 

nly  built,  has 
nvenience,  is 
ployed.     The 

1  page  from  o 
999  inclusive. 
It  Ledger  will 
ccompanying 


miniature  facsimile  sheets,  and  tracing  the  several  accounts  re- 
corded thereon  from  the  opening  entry  to  the  closing.     The  first 
four  accounts,  it  will  be  seen,  have  been  transferred  from  another 
ledger.     The  account  with  Cunnington,  who  owes  $26.65,  l^as 
been  brought  forward  from  line  960  in  ledger  B.     The  account 
with  Ramsay  has  been  brought  forward  from  line  972.  that  of 
Holden  from  line  986,  and  that  of  Mrs.  Malone  from  line  1,003.  all 
in  ledger  B.     The  several  balances  of  these  accounts  are  entered 
in  the^'first  column,  which,  as  previously  explained,  is  devoted  to 
Balances  Brought  Forward.       Cunnington,  it  will  be  noticed, 
makes  four  payments  during  the  month  of  January  of  50  cents 
each,  on  the  7th,  14th,  21st  and  28th  days  respectively.     These 
pavments  are  entered  item  by  item  as  they  occur,  being  posted 
from  the  pay  cards  or  cash  book,  and  at  the  end  of  the  month  are 
totalled.     The  amount  of  these  credits,  $2,  is  subtracted  from  the 
balance  brought  forward,  $26.65,  leaving  a  balance  of  $24'.65  to  be 
carried  forward  into  February.     The  same  number  of  payments  is 
made  by  Cunnin-ton  in  February,  which  are  totalled  and  sub- 
tracted, and  the  balance  of  $22.65  is  carried  forward  into  March. 
In  that  month  he  makes  five  payments,  making  a  total  credit  of 
$2.50,  which  subtracted  leaves  a  balance  of  $20.15  to  be  carried 
forward  into  April.     His  account  proceeds  in  this  general  way 
until  we  reach  October,  when  we  find  that  he  buys  an  additional 
bill  of  merchandise  amounting  to  $11.     This  comes  from  order 
slip  A  2,889,  and  the  proper  reference  is  posted  in  the  Sales  Num- 
ber column.     On  this  new  purchase  he  pays  $1  down,  and  in  ad- 
dition maintains  his  payments  of  50  cents  a  week  on  the  old  ac- 
count.    His  total  credits  for  the  month  of  October  are  $3.     His 
debits  consist  of  the  old  balance,  $7.15.  and  the  new  bill,  $11, 
which,  added  together,  make  a  total  of  $18.15.  from  which  is  sub- 
tracted the  amount  of  the  credits,  $3,  carrying  forward  into  No- 
vember a  balance  of  $15.15-     His  account  proceeds  in  regular 


i 


'^ 


i 


J28  THE    SELF-rROVING 

course  to  the  end  of  the  year.  The  balance  at  the  close  of  De- 
cember is  extended  into  Balance  Forward  Column,  $11.15-  ^h's 
amount  opens  the  account  in  the  ledger  for  the  new  year. 

In  Ramsay's  account,  which  starts  with  a  balance  of  S.13.05, 
with  two  credits  in  January  amounting  to  $2,  we  show  how  an 
Allowance  is  treated.     For  some  reason  or  other  he  is  to  be 
credited  with  a  deduction,  or  discount,  amounting  to  $1.     This 
amount  is  posted  into  the  Sundry  Credits  column,  and  in  the  ex- 
planation column  alongside  there  is  put  "A,"  which,  referring  to 
the  titles  printed  at  the  head  of  the  column,  stands  for  Allowance. 
The  total  of  the  cash  and  this  allowance  credit  is  subtracted  from 
the  Balance  Brought  Forward,  making  a  new  balance  of  $10.05, 
with  which  the  February  account  is  started.     Ramsay  makes  a 
single  payment  in  February,  and  the  balance  of  $9.05  is  earned 
forward  into  March.     Payments  continue  to  be  made,  month  by 
month,  including  June,  reducing  the  amount  at  that  date  to  $2.05, 
when,  for  some  reason,  not  necessary  to  explain,  Mr.  Ramsay 
ceases  to  make  payments.     Accordingly  the  balance,  $2.05,  m  this 
account    stares  the  manager  of  the  business  in  the  face  month 
after  month  during  August,  September,  October.  November  and 
December,  thereby  suggesting  investigation.     As  shown  in  the 
example  it  is  finally  carried  into  the  Balance  column  with  which 
the  ledger  closes  as  the  amount  with  which  the  account  is  to  be 
opened  in  the  new  year. 

Holden's  account  commences  in  January  with  a  balance 
brought  forward  of  $575.  He  at  once  buys  another  bill  of  goods, 
as  per  sales  No.  A  160,  amounting  to  $15.  He  pays  $4  down  on 
this  purchase  on  the  6th  of  the  month,  and  on  the  20th  pays  $2  on 
account  of  his  total  indebtedness.  The  old  balance  and  the  new 
bill  are  added  together,  the  credits  are  totalled  and  their  amounts 
subtracted,  leaving  a  balance,  $1475.  with  which  the  Februa:T 
account  is  commenced.     Holden's  account  proceeds  in  regular 


lose  of  De- 
1.15.  This 
r. 

e  of  5^13.05, 
ow  how  an 
ie  is  to  be 
o  $1.     This 
d  in  the  ex- 
referring  to 
•  Allowance. 
:racted  from 
:e  of  $10.05, 
say  makes  a 
05  is  carried 
le,  month  by 
late  to  $2.05, 
Mr.  Ramsay 
$2.05,  in  this 
;  face  month 
ovember  and 
shown  in  the 
n  with  which 
;ount  is  to  be 

ith  a  balance 
r  bill  of  goods, 
^s  $4  down  on 
Dth  pays  $2  on 
e  and  the  new 
their  amounts 
the  February 
eds  in  regular 


M 


IMIATURE    FACSIMILE 


OF  THE 


SELF-PROVING     INSTALMENT     LEDGER 


WITH    ENTRIES 


(SEE  PAGE  ia4) 


CopvmoHT  1897 

By  J.  F.  Browh  and 

A.  O.  KlTTRBDOr 


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ACCOUNTING    SYSTEM 


120 


course  until  the  month  of  May  is  reached.     At  this  time  the  bal- 
ance has  been  reduced  to  $6.75,  when  he  buys  some  more  goods, 
as  evidenced  by  sales  Nos.  A  1,137  for  $16.10,  and  A  1,204  for 
$2.80.     He  pays  $3  down  and  also  $2  on  account  this  month, 
making  a  tot  il  credit  of  $5.     This  is  subtracted  from  the  total  of 
the  balance  and  the  two  bills  which  he  has  bough' .  leaving  $20.65, 
with  which  the  account  is  opened  in  June.     His  account  now  pro- 
ceeds in  regular  course  until  September  is  reached,  with  a  balance 
ol  $12.65.      No  payments  are  made  in   September,  and   this 
amount,  therefore,  is  carried  forward  into  October.      In  October 
he  buys  goods  amounting  to  $74.36,  as  evidenced  by  sales  No.  A 
2,929,  and  pays  on  account  this  month  $5,  making  a  balance  of 
$82.01,  with  which  the  November  account  is  opened.     In  Novem- 
ber he  pays  $10,  making  his  December  balance  $72.01,  and  in 
December  he  pays  $5,  leaving  a  balance  of  $67.01  to  be  carried 
forward  to  the  new  ledger. 

There  are  no  new  features  presented  in  Mrs.  Malone's  ac- 
count that  need  to  be  specially  pointed  out  in  this  description, 
unless  it  be  that  in  January  three  bills  of  goods  were  charged  to 
her  account.  It  will  be  seen  that  while  the  ruling  of  the  ledger  is 
mtended  ordinarily  to  accommodate  only  two  charge  entries  per 
month,  three  have  been  crowded  into  the  column  in  this  case. 
Mrs.  Malone's  account  proceeds  with  commendable  regularity  in 
the  matter  of  payments  and  is  reduced  to  $13.89  at  the  close  of 
December,  which  amount  carries  forward  into  the  new  ledger. 

Thos.  Byers  commences  to  deal  with  the  concern  in  January, 
and  makes  a  bill,  first  of  $24.50,  as  evidenced  by  sales  No.  A  30, 
and  afterward,  finding  that  he  requires  a  few  more  goods,  buys  to 
the  amount  of  $6.60,  as  shown  by  sales  No.  A  149.  He  makes  two 
payments  during  the  month,  amounting  to  $3-75,  carrying  forward 
a  balance  of  $27.35  into  the  February  account.  He  buys  addi- 
tional goods  to  the  amount  of  $34,  in  February  as  shown  by  sales 


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180 


THE    SELF-PROVING 


No.  A  355.  He  makes  three  payments  in  this  month,  amounting 
to  $6,  and  carries  forward  a  balance  into  the  March  account  of 
$55.35.  From  this  time  forward  his  account  proceeds  with  con- 
stant reductions,  leaving  a  balance  at  the  close  of  October  of 
$24.35.  In  November  he  buys  an  additional  bill  of  $6.30,  as  evi- 
denced by  sales  No.  A  3,326.  His  account  at  the  close  of  the  year 
stands  $24.65,  which  amount  is  carried  forward  to  the  new  ledger. 

Miss  Lettie  Gross  comn.ences  to  deal  with  the  establishment 
in  February  and  opens  her  account  with  two  items,  a  bill  of  $13.50, 
as  shown  by  sales  No.  A  399.  and  a  bill  of  $7.25,  as  evidenced  by 
sales  No.  A  414.     She  pays  $1  down,  and  pays,  according  to  agree- 
ment, 50  cents  per  week,  making  a  total  credit  of  $2.50.     For  some 
reason  the  second  bill  of  goods  was  returned,  and  this  is  evidenced 
by  the  amount  in  the  Sundry  Credit  column,  with  the  explanatory 
letter  "G"  in  the  column  alongside.    The  balance  carried  forward 
into  March  is  $1 1.    The  account  proceeds  from  this  date  forward 
without  variation  from  the  usual  course  until  the  month  of  July, 
when  an  additional  bill  is  bought  amounting  to  $7.60,  indicated 
by  sales  No.  A  2,065.     In  this  month  a  special  allowance  of  25 
cents  is  made  for  some  reason  or  other,  and  this  is  posted  in  the 
Sundry  Credit  column,  with  the  explanatory  letter  "A."      The 
credits  in  total  are  subtracted  from  the  sum  of  the  balance  and  the 
purchase  made,  giving  $7.10  as  the  amount  with  which  the  Au- 
gust account  is  opened.       Payments  now  proceed  in  regular 
course  until  the  26th  of  October.    It  is  then  found  that  her  in- 
debtedness amounts  to  $1.10.     According  to  the  custom  that 
prevails  in  certain  instalment  establishments,  a  discount  is  made 
with  the  final  payment,  as  an  evidence  of  the  good  will  of  the  pro- 
prietor and  because  payments  have  been  made  with  reasonable 
promptness.    This  customer,  accordingly,  is  told  that  75  cents 
paid  at  this  time  will  close  the  account.    This  amount  is  forth- 
coming, making  the  total  cash  credits  for  the  month  $2.25.    The 


r 


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ACrouXTlNG    aiSTEM 


181 


,  amounting 
I  account  of 
Is  with  con- 
October  of 
56.30,  as  evi- 
e  of  the  year 
new  ledger, 
fitablishment 
)ill  of  $13.50, 
evidenced  by 
ing  to  agree- 
).     For  some 
,  is  evidenced 
;  explanatory 
rried  forward 
date  forward 
onth  of  July, 
60,  indicated 
jvvance  of  25 
posted  in  the 
■  "A."      The 
lance  and  the 
hich  the  Au- 
;d  in  regular 
i  that  her  in- 
custom  that 
;ount  is  made 
^ill  of  the  pro- 
th  reasonable 
that  75  cents 
ount  is  forth- 
h  $2.25.    The 


deduction  of  35  cents  is  posted  to  the  Sundry  Credits  column, 
thus  closing  the  account.  Blank  spaces  in  the  monthly  divisions, 
it  will  be  seen,  follow  Miss  Gross's  name  from  this  date  forward 
to  the  end  of  the  year. 

W.  J.  Mitchell  commences  to  deal  with  the  establishment  in 
April,  buying  a  bill  of  goods  at  that  time  of  $45,  evidenced  by 
sales  No.  A  869.  His  account  is  commenced  in  the  April  division, 
just  the  same  as  the  other  accounts  we  have  described  have  been 
commenced  in  the  other  monthly  divisions.  Payments  are  made 
in  regular  course,  with  the  result  that  the  account  at  the  close  of 
December  has  been  reduced  to  $5,  which  balance  is  carried  forward 
to  the  new  ledger.  * 

Samuel  Tutty  begins  to  deal  with  the  concern  in  July.  The 
first  charge  to  his  account  is  a  bill  of  $54.60,  evidenced  by  sales  No. 
A  2,059,  which  is  posted  in  the  July  account,  the  same  as  the  other 
accounts  that  we  have  described  have  been  posted  in  other 
months. 

We  have  limited  our  examples  to  eight  accounts,  which  for 
better  display  and  convenience  in  examination    have  been  dis- 
tributed through  the  depth  of  a  page,  instead  of  occupying  eight 
consecutive  Hues,  as  would  be  the  case  in  actual  practice.      We 
ha\'e  selected  the  accounts  for  the  purpose  of  showing  the  usual 
method  of  using  the  ledger,  and  illustrating  how  special  credits, 
additional  charges  for  goods,  &c.,  are  to  be  made.     As  we  have 
proceeded  with  our  explanations  the  reader  has  undoubtedly  no- 
ticed that  the  dates  in  the  month  on  which  payments  are  made 
are  written  directly  above  the  items  in  the  space  provided  for  the 
same  by  the  interlining.    The  reader  has  also  noticed,  we  pre- 
sume, that  there  are  provided  spaces  for  two  items  in  Sundry 
Credits  each  month,  the  same  as  for  two  charges  each  month. 
These  allowances  of  space  have  been  found  in  practice  to  be  quite 
sufficient  for  the  requirements  of  ordinary  instalment  estabUsh- 


fmMiii»ii<^ 


^     iiiiiwimiiiniii 


132  THE    SELF-PROVINO 

ments.  but  variations  can  be  made  as  required  to  meet  the  neces- 
sities  of  special  cases. 

The  correctness  of  the  instalment  ledger  is  proved  as  fol- 
lows :-By  footing  the  column  devoted  to  Balances  Brought  For- 
ward into  the  January  account,  we  find  the  total  is  $69.59-     The 
goods  charged  to  customers  during  that  month,  which  is  ascer-    , 
tained  by  footing  the  Merchandise  column,  amounted  to  $89.85. 
The  Cash  credits  to  the  several  accounts  amounted  to  $22.75,  and 
the  sundry  credits  $1.    The  latter  amounts  are  also  determined  by 
footing  the  columns  devoted  to  these  items.     By  taking  the  total 
of   the    Balances    brought    forward,    adding   the    Merchandise 
charged  and  subtracting  the  total  of  the  Credits,  we  have  $1 35-69 
as  the  amount  of  the  balances  carried  forward  into  the  month  of 
February.     Footing  the  balance  column  with  which  the  February 
account  is  opened,  we  find  that  the  sum  of  the  balances  is  also 
$135.69,  which  is  satisfactory  evidence  that  the  ledger  has  been 
correctly  footed,  and  that  the  individual  balances  have  been  cor- 
rectly struck  and  correctly  carried  forward. 

By  comparing  the  total  of  the  charges  to  customers,  $89.85, 
with  the  amount  sold  to  instalment  customers,  as  shown  by  the 
Sales  Record  for  the  month,  we  shall  ascertain  whether  or  not  the 
correct  amount  has  been  posted  to  the  ledger.  Again,  by  com- 
paring the  total  cash  credits  posted  to  instalment  customers'  ac- 
counts, in  this  case  $22.75.  with  the  debit  side  of  the  Cash  Book 
for  the  same  period,  we  shall  know  whether  all  of  the  cash  re- 
ceived has  been  posted. 

If  interest  had  been  posted  to  the  customers'  accounts  during 
the  month,  then  the  interest  items,  in  proving  the  ledger,  would 
have  been  put  into  an  amount  by  themselves  for  checking  with  the 
total  of  the  charge  for  interest  in  the  journal,  or  wherever  the 
entry  was  made.  In  the  same  way  sundry  credits  would  be 
analyzed  and  separated  into  amounts  corresponding  with  the  items 


;t  the  neces- 

oved  as  fol- 
Irought  For- 
;69.59.    The 
lich  is  ascer- 
;d  to  $89.85. 
3  $22.75,  and 
etermined  by 
:ing  the  total 
Merchandise 
have  $135.69 
the  month  of 
the  February 
lances  is  also 
[ger  has  been 
ave  been  cor- 

)niers,  $89.85, 
shown  by  the 
her  or  not  the 
gain,  by  com- 
;ustomers'  ac- 
he Cash  Book 
if  the  cash  re- 

xounts  during 
ledger,  would 
eking  with  the 
■  wherever  the 
dits  would  be 
•  with  the  items 


•v*- 


ACCOUNTING    SYSTEM 


133 


that  are  posted  into  this  coUtmn-namely,  Allowances.  Bad 
Debts  Goods  Returned  and  Notes-and  each  compared  with  the 
corresponding  record  in  the  journal  or  other  posting  medmm^ 
The  same  general  explanation  applies  to  accounts  to  be  written  off 
as  "bad,"  and  to  accounts  which  are  credited  with  Notes. 


.  IWailHMil 


-. ..jiaiWtJiiltminri'trill--<iiiW> 


CARRYING    FORWARD    BALANCES 

The  Self-Proving  Mercantile  Ledger,  as  elsewhere  described 
in  this  volume  and  as  illustrated  by  the  miniature  fac  simile  pages 
bound  in,  is  composed  of  wide  and  narrow  leaves  arranged  m 
sections.    The  first  wide  leaf  of  each  section  receives  the  names 
of  the  customers  and  holds  their  accounts  for  two  months,  Jan- 
uary and  February,  while  the  facing  narrow  leaf  holds  the  ac- 
counts for  March  and  April.    The  second  and  third  narrow  leaves 
facing  each  other  carry  May  and  June,  and  July  and  August,  re- 
spectively.    The  accounts  as  presented  to  view  when  the  book  is 
onened  are  in  monthly  sections  of  four.    At  the  end  of  each  fourth 
month  it  is  necessary,  therefore,  to  carry  the  balances  over  the 

leaf. 

The  transferring  of  balances  is  readily  and  expeditionsly  ac- 
complished by  the  use  of  the  Self-Proving  Transfer  Slip,  an  illus- 
tration of  which  is  presented  herewith.     These  slips  are  ruled  and 
numbered  to  correspond  with  the  ledger  lines,  and  are  provided 
with  a  hanging  lip  at  the  top  adapted  to  engage  with  the  upper 
edge  of  the  wide  page  in  a  way  to  cause  the  slip  to  lie  directly 
against  and  parallc:  with  the  edge  of  the  narrow  leaf.    The  Trans- 
fer Slip  is  instantly  adjusted  in  proper  position,  and  the  line  num- 
bers with  which  it  is    provided,  made  to  coincide  with  the  line 
numbers  on  the  margins  of  the  narrow  leaves,  thus  affording  the 
bookkeeper  constant  proof  that  the  sUp  is  in  correct  position. 
The  Transfer  Slip,  adjusted  in  place  in  this  manner,  receives  the 
balances  as  they  are  struck  in  footing  the  monthly  accounts  on 


JlMjjLillJ<,tljL)»»l|l.!l,'-,l  JJV^I^'-"    i't' 


ACCOUNTING    SYSTEM 


135 


:es 

lere  described 
,c  simile  pages 
s  arranged  in 
ves  the  names 
months,  Jan-    r 
holds  the  ac- 
narrow  leaves 
id  August,  re- 
len  the  book  is 
.  of  each  fourth 
ances  over  the 

;peditionsly  ac- 
;r  Slip,  an  illus- 
)s  are  ruled  and 
id  are  provided 
with  the  upper 
)  to  lie  directly 
:af.    The  Trans- 
id  the  line  num- 
le  with  the  line 
us  affording  the 
;orrect  position, 
ler,  receives  the 
hly  accounts  on 


the  right  hand  narrow  pages.    When  the  amounts  have  been  en- 

e  ed  upon  the  Slip  in  this  way  it  is  then  detached  and  put  m 

ce  on  the  left  hand  wide  page.    It  is  there  ad3usted  to  corr  - 

spond  by  line  numbers  with  the  columns  of  the  new  month  re- 


SELF-PR0VIN6 
TRANSFER  SUP 

A »" 


Cut 

fromC 
upward* 
towards 
A  and  B 


Um 

sharp 

knift 

Cut  to 

salt  pais 


'"sTrr.  ---JUs' 

34 1     ---Jp 

35 1          T      .ILe 

36 1_                __.      3« 

87 1             ----i^ 

38                    _  _  . 1  39 

39                   __    1  39 

40            MQ. 

41      --4-^ 

42                     --4-^ 

43                                1   ♦S 

44           J JLi± 

45 1               ----1-^ 

46 1           4---jp 

47                 ---Hp 

48                 -  -  -  Jp 

49    I             ■■4^ 

H««<V«rli      TortMo 

''""^  «   „  »„o  Tuc  «Pi  f-Provinq  Instalment  and  Mer- 

vealed  by  the.narrow  page  after  it  is  tumert.  With  t.e  figures 
on  the  Transfer  Slip  alongside  the  places  that  they  are  to  occupy 
in  the  new  month,  it  is  a  very  simple  matter  to  comp le.e  t  e  work. 
The  Transfer  SHps  are  provided  with  spaces  for  foho  num- 
bers, by  which  they  may  be  identified.    The  Slips  are  prmted  on 


jgg  THE    SELF-PROVING 

both  sides,  one  side  being  adapted  for  use  with  those  pages  of 
the  ledger  the  lines  of  which  are  numbered  from  o  to  49  in- 
clusive, and  the  other  for  those  pages  the  lines  of  which  are  num- 
bered from  50  to  99  inclusive. 

In  addition  to  the  mere  use  of  carrying  forward  amounts  m 
the  accounts  as  here  explained,  the  Transfer  Slips  are  adapted  to 
be  used  in  proving  the  balance  footings  of  the  ledger  before  the 
amounts  have  been  entered  on  the  new  page.    The  Slip  may 
be  used  for  this  purpose  in  several  different  ways,  one  or  two  of 
which  we  will  refer  to  briefly:    As  many  Slips  may  be  in  use  at 
a  time  as  there  are  pages  the  amounts  of  which  are  to  be  earned 
forward.    After  the  balances  have  been  entered  on  the  Slips  all 
of  them  may  be  detached  from  the  ledger  pages,  and,  before  the 
amounts  have  been  extended  into  their  new  positions,  taken  to 
the  Comptometer,  to  be  footed  by  the  machine,  either  singly  or 
collectively,  as  may  be  the  preference  of  the  bookkeeper.     If 
footed  singly,  the  amount  of  each  Slip  may  be  written  at  the  bot- 
tom for  use  in  carrying  forward,  or  the  amounts  may  be  totalled 
upon  a  separate  Slip,  or  totalled  by  the  machine  without  any 
Slip     If  the  Comptometer  is  not  at  hand  for  use  in  this  way,  the 
Slips,  similariy  removed   from  the  ledger,  may  be  handed  to  the 
bookkeeper's  assistant  for  footing,  while  he  attends  to  other 
work,  thus  getting  the  collective  balances  ready  to  transfer  to 
'    the  new  month  at  the  same  time  that  the  individual  transfers  are 
made     The  total  footings  of  the  balances  should  equal  the  bal- 
ance of  the  corresponding  group  account  in  the  Private  Ledger. 
Again,  each  page,  including  its  Transfer  Slip,  may  be  proved 
by  itself,  without  reference  to  other  pages  and  shps,  by  footmg 
the  debits,  footing  the  credits  and  subtracting  one  from  the 
othpr     The  balance  thus  obtained  should  equal  the  footmg  of 
the  amounts  on  the  Transfer  Slip.    The  same  routine  obtains  with 
the  Instalment  Ledger.    The  Transfer  Slips  are  manufactured  of 


-wii^iu'muuiiiUl-JiUL-'Wti-^' -'"'--" 


e  pages  of 

to  49  iti- 

h  are  num- 


ACCOUNTING    SYSTEM 


18T 


heavy  ledger  paper,  and  are  supplied  in  a  form  to  maintain  their 
IZl  without  folding  or  wrinkling,  and  in  a  way  to  be  convenient 
for  use  as  required. 


amounts  in 
adapted  to 

before  the 
e  Slip  may 
e  or  two  of 
)e  in  use  at 
D  be  carried 
:he  Slips  all 
,  before  the 
IS,  taken  to 
ler  singly  or 
ckeeper.     If 
1  at  the  bot- 
f  be  totalled 
without  any 
:his  way,  the 
inded  to  the 
ids  to  other 
3  transfer  to 

transfers  are 
qual  the  bal- 
vate  Ledger. 
ly  be  proved 
s,  by  footing 
>ne  from  the 
he  footing  of 
;  obtains  with 
nufactured  of 


ill- 


I 


NUMBER    RECORD 
Where  original  entries  are  made  the  foundation  of  postings 
and  the  sheets  upon  which  they  occur  are  to  be  preserved  in  reg- 
ular order,  as  elsewhere  described  and  illustrated,  a  system  of 
serial  numbers  by  which  to  designate  the  several  sheets  or  forms 
is  indispensable.    In  connection  with  the  Self-Provmg  Account- 
inc.  System,  it  is  recommended  that  every  paper  that  is  to  be  pre- 
served, excepting,  perhaps,  correspondence,  be  given  a  number, 
and  that  these  numbers  be  in  definite  series,  and  that  the  records 
of  numbers  be  so  managed  as  to  reduce  to  a  minimum  the  danger 
of  duplicating  a  number;  that  is,  using  the  same  number  for  two 
different  purposes  in  the  same  class. 

The  most  important  of  the  several  series  of  numoers  to  be 
used  is  that  applied  to  the  sales  or  orders.  The  points  to  be  ob- 
served in  connection  with  order  numbers  are  also  important  in 
other  directions,  as,  for  example,  with  the  numbers  of  vouchers, 
numbers  of  shipments  or  deliveries,  numbers  of  goods  returned, 
numbers  of  invoices,  &c.,  and,  accordingly,  a  description  of  the 
Record  used  for  Sales  Numbers  will  be  sufficient  to  indicate  the 

requirements  of  all  cases. 

The  Record  of  Sales  Numbers  illustrated  herewtli  is  sup- 
plied either  in  book  form  or  in  the  shape  of  loose  sheets,  to  be 
held  in  a  clip  or  binder,  as  may  be  preferred.  In  whichever  *ape 
the  record  is  supplied,  its  use  is  the  same.  The  Unes  of  the  sheets 
or  pages  are  numbered.  In  one  form  each  sheet  or  page  contams 
50  lines,  thus  making  two  sheets  or  pages  to  the  hundred,  and 


n  of  postings 
served  in  reg- 
a  system  of 
leets  or  forms 
nng  Account- 
it  is  to  be  pre- 
/en  a  number, 
lat  the  records 
um  the  danger 
umber  for  two 

numbers  to  be 
aints  to  be  ob- 
D  important  in 
rs  of  vouchers, 
oods  returned, 
cription  of  the 
to  indicate  the 

;rewith  is  sup- 
e  sheets,  to  be 
whichever  shape 
es  of  the  sheets 
r  page  contains 
2  hundred,  and 


issfmn'*'^ 


ACCOUNTING    SYSTEM 


130 


in  another  style  each  sheet  or  page  contains  25  lines,  thus  re- 
quiring four  pages  or  sheets  to  the  hundred.  Where  the  sheets  or 
pages  are  in  sets  or  two,  as  above  described,  the  line  numbers  on 
the  first  read  from  o  to  49  inclusive,  and  on  the  second  from  50 
to  99  inclusive.  Where  the  sheets  or  pages  are  in  sets  of  four,  as 
above  described,  the  line  numbers  on  the  first  read  from  o  to  24, 
on  the  second  from  25  to  49,  on  the  third  from  50  to  74,  and  on 


15 

e?iu  Damon 

D«l«  tf  t*l« 

Na. 

NAME 

ADDRI» 

"tr 

Dito0f 
CtMrr 

60 

81 

63 

68 

k 

64 

,- — 

' — 

S5 

66 

^-^ 

67 

^ 

1 

L- — " 

Reduced  Facsimile  of  Numbered  Record  for  Orders    (Copyright  1897  by  J.  F. 
Brown  and  A.  O.  Kittredqe.) 

the  fourth  from  75  to  99.  Where  loose  sheets  are  employed  of 
this  style  ,they  are  used  in  sets  of  four,  all  bearing  the  same  desig- 
nating number,  and  in  the  case  of  a  book,  the  pages  appear  in  sets 
of  four  also,  each  page  of  a  set  bearing  the  same  designating  num- 
ber. 

The  page  or  sheet  numbers  are  to  be  read  with  the  line  num- 
bers, thus,  for  example,  if  the  page  before  us  is  numbered  15,  and 
the  line  numbers  are  from  50  to  99  inclusive,  then  the  numbers 
represented  are  1,550,  1,551,  and  so  on  to  1,599.  The  next  sheet 
or  page  upon  which  the  line  numbers  are,  from  75  to  99  inclusive, 


-I 


I, 


\ 


^^  THE    SELF-PROVING 

are  read  in  conjunction  with  the  page  or  sheet  number  in  the 
same  manner,  and  give  Nos.  i,575,  i,576,  &c..  up  to  and  mcludvng 
I  599  By  this  plan  numbers  are  constantly  provided  m  senes  ot 
any  required  amount,  without  special  expense  of  pnntmg  sta- 
tionery, and  without  the  tedious  writing  in  of  figures  or  prmtmg 
with  numbering  machines  that  is  commonly  resorted  to. 

The  series  of  numbers  may  be  extended  to  any  desired  hn^it, 
as,  for  example,  to  10,000  or  to  100,000.    The  several  series  that 
are  used  for  a  given  purpose  may  be  known  by  the  letters  of  the 
alphabet.    Thus,  supposing  that  the  limit  of  a  series  is  fixed  at 
10,000,  when  the  last  number  has  been  reached,  a  new  series  is  to 
be  started  known  as  "A,"  with  the  numbers  written  A50,  A965. 
&c     The  books  or  blanks  that  are  on  hand  when  a  new  series  is 
commenced  would  require  onlv  the  impression  of  the  latter  A  in 
proper  place  to  distinguish  them  from  the  ones  which  had  been 
previously  employed  in  the  first  series.    In  the  same  manner,  suc- 
cessive series  of  numbers  would  be  known  as  B,  C,  D,  &c. 

The  sales  or  orders,  as  they  occur,  are  entered  agamst  their 
numbers  in  the  Number  Record,  thus,  in  each  case,  preempting 
a  number,  and  indicating  that  a  given  number  having  been  used 
for  one  order   must  not  be  appUed  to  another.    The  book  or 
sheets  provide  by  the  ruling  employed,  first  the  Date  of  Sa.e,  fol- 
^o^ving  which  is  Name  and  Address  of  the  customer,  and  then  a 
line  for  Ledger  Reference,  and  finally  the  Date  of  Charge.    The 
function  of  this  book  is  only  to  supply  numbers  to  the  orders  by 
which  thereafter  they  are  known  on  the  Order  Record.    The  lat- 
ter becomes  the  equivalent  of  the  order  book,  as  commonly  desig- 
nated, but  the  details  of  the  orders  are  on  sales  sheets  put  away 
in  post  binders,  as  described  in  another  part  of    thi.   volume. 
Charges  to  customers  are  made  by  entering  the  amount  shown  by 
the  sales  sheet  in  the  Sales  Record.    In  a  very  large  business, 
however,  it  is  not  always  possible  for  the  charges  in  this  manner 


niwt-wiiwwwjj  wmw 


ACCOUNTING    SYSTEM 


Ml 


mber  in  the 
nd  including 
1  in  series  of 
rinting  sta- 
5  or  printing 
i  to. 

iesired  limit, 
al  series  that 
letters  of  the 
2S  is  fixed  at 
w  series  is  to 
1  A50,  A965, 
new  series  is 
le  latter  A  in 
lich  had  been 
manner,  suc- 
D,  &c. 
against  their 
e,  preempting 
ing  been  used 
The  book  or 
te  of  Sale,  fol- 
er,  and  then  a 
Charge.    The 
I  the  orders  by 
:ord.    The  lat- 
mmonly  desig- 
leets  put  away 
this   volume, 
lount  shown  by 
large  business, 
in  this  manner 


currecU  hence    he  ""J  „,,,,  ,ws  design  supplies. 

^3;cr„pr::^:::u  <s ---!:::::::  o^ 

Number  Record  will  always  show  '^^^  ^^^^XL^,,^  .,e 

.„orr  soon .  aiie  ^^^-^x:^:::^! 

unused  number  shown  by  the  ^''"'^^^^^^^J'^t.  .us.o,n.r 
Lradr:T.™tr  riroHhe  .ansaCon  is 
Irud  inTe  booJof  .he  business  in  a  way  .0  secur.  accuracy. 

'"Z:::^  rl:" rushed  ..  „„  deUve.  sha,.  be  made 
witll  a  properly  numbered  blank  covering  '  --' -^f/^ 
all  blanks  shall  be  returned  to  the  office  for  final  «".B-  J"  Jf^ 
ulation,  together  with  the  other  P"—  w"^^*  ^^  ^^n- 

::::::bre^::^:rrn:n:t^;-bythes^^^^^^^^^^^^ 

duly  written  upon  the  face  of  the  order  slip  or  mvo,ce  .s  thereby 
trit.rn  upon  the  carbon  copies.  The  mul.iplicat.on  of  records  by 

''\  .ales  nur„l,er  is  never  to  be  duplicated.  Once  us^d  the 
number  always  stands  for  the  transact.on  to  wh.ch  ,  has  be^n 
^nulled  However  numerous  may  be  transactions,  the  supply 
of  ■  ulerVrnever  exhausted,  nor  is  it  necessary  to  go  into  an 
:,„;ro„"ue  number  of  l..urcs,  for,  as  explained  above,  different 


THE    SELF-PROVING 

series  may  be  established  and  managed  in  a  way  to  keep  the  num- 
bers within  reasonable  bounds,  while  also  securing  all  the  advan- 
tages here  described. 


!M*wiAMil»V': 


5W.'i?S:&'«>^-'4.*T 


)  the  num- 
the  advan- 


SALES    RECORD 

The  SeH-Proving  Sales  Record  is  a  register  of  the  sales  sheets 
of  the  establishment,  with  notation  of  date,  order  number  and 
the  amount  of  the  sale,  with  provision  for  extending  the  amount     - 
into  Instalment  Ledger  or  Sundry  Debtors,  according  to  the 
nature  of  the  account.     When  the  sales  sheets,  properly  filled  out, 
reach  the  bookkeeper,  and  the  shiping  department  returns  the 
duplicate  showing  that  the  goods  have  been  delivered  the  book- 
keeper is  in  position  to  make  the  entry  upon  the  Sales  Record. 

He  enters  the  date  of  the  charge,  the  number  of  the  order, 
the  name  of  the  customer  and  the  amount  of  the  sale,  and,  m  turn 
extends  the  amount  into  the  Instalment  Ledger  colunm  if  the 
account  is  located  in  the  Instalment  Ledger    or   xnto   Sundry 
Debtors'  column  if  the  account  is  in  that  division  of    he  booKs. 
At  the  same  time  he  extends  on  the  same  Une,  in  the  column 
headed  Tsoc,  the  cost  of  the  goods  as  figured  on  the  margin  of  tl^ 
office  copy  of  the  sales  sheet.     In  due  course  the  bookkeeper 
posts  the  item  to  the  ledger,  putting  into  the  Ledger  Reference 
column  the  page  or  line  of  the  account. 

Upon  the  page  devoted  to  the  Number  Record  we  have  de- 
scribed how  the  Sales  Record  may  be  checked  with  the  Number 
Record  in  a  way  to  insure  all  charges  and  deliveries  to  ^ujy^PP^^^ 
upon  the  Sales  Record.  The  column  of  the  Sales  Record  devoted 
to  auditor's  check  may  be  employed  to  indicate  comparison  m 
\his  regard,  as  well  as  other  features  of  examination  at  the  dis- 
cretion of  the  manager. 


1 


5>v. 


THE    SELF-PROVING 
***    various  features  o.  prooi  arc  afforded.     The  <o.a.  o.  *e  R^s', 

ment  Accounts  and  bunury  u^  ^j 

:xi;:::orar:uM.e.o.,ou.^^ 

instahnent  Ledger  alone,  -^  du^  —Lu  „,ay  be  ob- 
.„e  lufst  o^heesubUshu^^ 


1 


sake  of  completing  the  Sales  Record,  ^'^l^'^^^^J^  ^^  ^,,  ,,. 
sales  appear  thereon,  the  column  ^^^^^^Z....r.  and 
;:X:S;::  rm^the^a^rd  wants  Of  eert.n—^^ 

,a„  P«ferre  ;^  '°J^'  ^^^^^  .,,  ,„„«„,  „,  the  column  entitled' 
LXnrXrposts  to  the  debit  of  Instalment  L.d,er  Ac- 


ACCOT'NTIXG    SYSTEM 


145 


tal  of  the  first 
with  the  total 
,ted  to  Instal- 
)er  'leductions 
The  total  of 
It  Ledger  may 
column  in  the 
of  course,  for 
eck  may  be  ob- 
vith  the  Charge 

ribed,  will  show 
the  cash  sales, 


197  BY  J.  F.  BROWN 

ook.  If,  for  the 
i  to  have  the  cash 
Sales,  at  the  ex- 
iry,  however,  and 
certain  merchants 
le  book. 

es,  posts  direct,  or 
I,  according  to  the 
mt  in  the  Private 
be  column  entitled" 
Iment  Ledger  Ac- 


count in  the  Private  Ledger,  and  the  footing  of  the  onUunn  en- 
titled Sundry  Debtors  posts  to  the  debit  of  Sundry  Debtors'  Ac- 
count in  the  Private  Ledger.  Cash  Sales  post  from  the  Cash 
Book  to  the  credit  of  Selling  Account  in  the  Private  Ledger,  and, 
therefore,  if  cash  sales  are  entered  upon  the  Sales  Record,  as  men- 
tioued  above,  the  bookkeeper  must  take  care  to  avoid  the  mistake 
of  posting  them  twice.  The  column  headed  Tsoc  is  to  be  footod 
and  posted  into  the  column  of  the  Private  Ledger  entitled  Cost  of 
Goods  Sold,  thereby  providing  the  basis  of  the  cross  ci  'ry  to  be 
made  at  intervals  betwetii  Selling  Account  and  Buying  Account, 
as  elsewhere  described. 

In  addition  to  the  form  of  Sales  Record  illustrated  here- 
with, a  combined  Sales  and  Goods  Returned  Record  is  supplied, 
the  ruling  and  operation  of  which  are  analagous  to  the  Purchase 
Record,  illustrated  on  another  page.  Tt  afifords  in  a  single  book 
a  complete  record  of  good-  sent  out,  and  goods  returned  by  cus- 
tomers, thus  supplying  to  Selling  Account  the  entries  on  both 
sides. 


' 


i 

I 


PURCHASE    RECORD  ' 

Tr,P   Self-Proving   Purcliase   Record,   illustrated   herewith, 
serves  tlu  double  purpose  of  recording  the  invoices  of  goods  pur- 
chased and  of  recording  returns,  thus  showing  net  purchases.    1  he 
invoices  are  the  original  records  and  are  preserved  by  f^hug  ui  a 
post  binder,  as  described  upon  another  r>:i,iTe.  or  in  some  other  ap- 
propriate manner,  the  names  of  sellers,  .Ldes  and  amounts  of  each 
being  fus'  entered  vv^n  the  Purchase  Record.     The  Purchase 
Record,  therefore,  mav  be  described  as  simply  a  register  of  m- 
voices.     It  is  also  a  register  of  returns.     Where  many  returns  are 
the  rule  it  would  be  expedient  to  establish  a  second  bmder  m 
which  to  file  on  proper  blanks  the  shipments  back.     This  file 
should  have  its  own  series  of  numbers. 

The  Purchase  Record  is  provided  with  three  pairs  of  money 
columns-namely,  a  debit  and  credit  under  each  of  the  following 
heads:— Buying,  Manufacturing  and  Purchase  Ledger.     All  the 
accounts  with  those  from  whom  goods  are  bought,  as  elsewhere 
explained,  are  opened  in  Purchase  Ledger,  and  therefore  the  Pur- 
chase Ledger  columns  on  the  Purchase  Record  receive  the  credits 
of  the  invoices.     In  turn,  they  receive  the  debits  of  the  goods 
returned.    The  balance  is  the  net  amount  of  the  goods  purchased. 
The  debits  for  goods  coming  in  would  either  be  Buying  or 
Manufacturing,  or  a  part  of  each,  according  to  the  character  of 
the  business  conducted.      The  credits  for  the  goods  returned 
would  likewise  be  in  one  or  the  other  of  these  accounts. 

The  Purchase  Record  is  so  arranged  that  a  single  hne. 


J 


ed   herewith, 
of  goods  pur- 
irchases.    The 
by  filing  in  a 
ome  other  ap- 
lounts  of  each 
The  Purchase 
register  of  in- 
;ny  returns  are 
;ond  binder  in 
ick.     This  file 

pairs  of  money 
f  the  following 
:dger.     All  the 
it,  as  elsewhere 
:refore  the  Pur- 
eive  the  credits 
s  of  the  goods 
3ods  purchased, 
r  be  Buying  or 
;he  character  of 
goods  returned 
>unts. 
t  a  single  line, 


) 


mmmmm^. 


.^, 


^. 


^>.  ^-vi 


IMAGE  EVALUATION 
TEST  TARGET  (MT-3) 


1.0 


I.I 


1.2 


IL2^  i  u  i  1.6 


fri 


'/ 


% 


L 


Photographic 

Sciences 

Corporation 


^ 


23  WEST  MAIN  STREET 

WEBSTER,  N.Y.  14580 

(716)872-4503 


— iwip^'^«i^W»] 


CIHM/ICMH 

Microfiche 

Series. 


CIHM/ICMH 
Collection  de 
microfiches. 


it- 


Canadian  Institute  for  Historical  Microreproductions  /  Institut  Canadian  de  microreproductions  historiques 


ACCOUNTING    SYSTEM 


147 


whether  representing  a  debit  or  a  credit,  is  enough  for  a  given 
transaction.  A  cokimn  for  ledger  reference  of  debit  postings  is 
provided,  and  also  one  for  credit  postings.  A  column  is  provided 
for  Invoice  Number,  which  column  may  also  take  the  number  of 
the  return  in  the  event  of  a  series  of  numbers  being  established  for 
returns.  The  latter  should  be  appropriately  distinguished  from 
the  former  by  the  initial  "R"  or  by  some  other  convenient  means. 
A  column  is  also  provided  for  auditor's  check,  which  leaves  upon 
the  record  at  all  times  the  evidence  of  examination  or  lack  of  ex- 
amination upon  the  part  of  the  proprietor  or  managing  man. 

The  individual  accounts— that  is,  the  accounts  with  those 
from  whom  the  business  buys  goods,  will  be  posted  from  the  Pur- 


u 

ll«. 

rMt 

Dr. 

If 

NAMn-MOJtCCOUNTl 

Falk 

■uvma          1 

MINUFACTUIIINQ      |       rUHCHAU  UOOU     { 

Or. 

Or. 

Of. 

Cr. 

Or. 

Cr. 

«wtf 

,. 

JJJ^ 

_\m 

iiLLliiJ 

^-i   ■■ 

JJ>^ 

U-^ 

^"•H 

JXLUJ-^ 

Facsimile  of  Purchase  record.  (Copyright  1897  by  J.  F.  Brown  and  A.  0. 

KiTTREDQE.) 

chase  Record  to  the  individual  ledgers  in  the  items  as  they  occur. 
Buying  Account,  Manufacturing  Account  and  Purchase  Ledger 
Account,  in  turn,  will  be  posted  from  footings. 

If  the  Purchase  Record  is  used  in  connection  with  the  Pri- 
vate Ledger,  the  footings  of  the  columns  daily,  weekly  or  monthly, 
according  to  the  rule  established,  will  be  posted  to  the  accounts 
in  the  latter  either  direct  or  through  the  medium  of  a  daily  report, 
or  by  being  recapitulated  upon  the  face  of  the  journal,  as  else- 
where described.  Ledger  pages  should  be  inserted  in  the  refer- 
ence columns  opposite  the  individual  items  that  are  posted,  and 
a  check  mark  should  be  put  opposite  each  of  those  items,  which 


' 


yWglt^-lUgl"'.!^' jl-^JL'  ,41  J- 


3^48  THE    SELF-PROVING 

are  extended  into  one  or  the  other  of  the  columns  and  posted  by 
being  totalled,  thus  always  showing  how  far  the  work  has  pro- 
gressed.    In  turn,  the  footings  of  the  columns,  when  transferred 
to  the  journal  or  carried  to  the  Private  Ledger,  should  be  prop- 
erly marked  with  journal  page  or  ledger  page,  as  the  case  may  be. 
The  Purchase  Record  will  contain  all  the  usual  credits  to  the 
Purchase  Account  in  the  books,  the  exceptions  being  Notes  Re- 
turned or  cash  advanced  to  take  up  paper  on  the  basis  of  an  ex- 
tended credit,  Discounts  for  Cash,  etc.     It  will  also  show  the 
total  of  the  ordinary  debits  to  Buying  Account  and  Manufactur- 
ing Account,  the  exceptions  being  freight  items,  purchases  for 
cash,  and  the  like. 


osted  by 
has  pro- 
ansferred 
be  prop- 
;  may  be. 
its  to  the 
fotes  Re- 
of  an  ex- 
show  the 
nufactur- 
:hases  for 


CASH    JOURNAL 

The  book  known  in  the  Self-Provinp  Accounting  System  as 
the  Cash  Journal  may  be  variously  used  according  to  the  nature 
of  the  business.  Briefly  described,  it  is  an  extended  column  jour- 
nal, the  columns  being  of  sufficient  variety  to  permit  any  desired 
division  of  the  business  to  be  recorded  in  the  journal  alone.  It 
also  serves  as  a  recapitulation  book,  in  which  the  various  auxiliaries 
are  summarized.  In  many  cases  one  of  its  most  useful  functions 
is  to  serve  as  a  medium  for  cross  entries  between  different  going 
accounts  in  different  ledgers,  as  in  the  case  of  transfers,  &c.  It 
is  of  a  form  also  to  be  convenient  for  use  as  a  voucher  distributing 
medium,  useful  in  all  cases  where  business  is  conducted  upon  the 

voucher  plan. 

The  cash  columns  in  the  Self-Proving  Journal  are  supple- 
mented by  a  balance  column,  thus  facilitating  a  record  of  daily  bal- 
ances without  footing  lines.  A  pair  of  columns  headed  Bank  are 
also  provided,  thus  adapting  it  to  be  used  either  with  or  without 
the  bank  account  separated  from  the  cash.  The  Self-Proving  Cash 
Journal  is  constructed  upon  the  wide  and  narrow  leaf  principle, 
with  the  wide  leaves  reinforced  throughout  that  portion  of  their 
width  which  extends  beyond  the  narrow  leaves,  thus  making  it  a 
flat  book  convenient  for  writing  no  matter  in  what  part  it  happens 
to  be  opened.  The  lines  on  the  several  pages  are  numbered,  thus 
facilitating  references  horizontally  across  the  entire  book.  By 
using  the  line  numbers  in  connection  with  the  page  numbers  this 
arrangement  affords  a  convenient  basis  of  ledger  references. 


■"H» 


100 


THE    SELF-rROVIXG 


The  Self-Proving  Cash  Journal  varies  from  the  conventional 
journal  in  the  way  in  which  the  entries  may  be  made.  Both  a  debt- 
or ledger  reference  column  and  a  creditor  ledger  reference  column 
are  furnished,  and,  therefore,  the  debits  and  credits  may  be  en- 
tered on  the  same  line.    There  is  also  brief  space  for  "Particulars." 

One  of  the  useful  purposes  to  which  this  book  may  be  put  is 
that  of  receiving  a  daily  summary  of  all  the  auxiliary  books  in  the 
form  of  a  bookkeeper's  or  manager's  daily  report,  the  footings  of 
which  post  to  the  Private  Ledger. 


,'entional 
li  a  debt- 
e  column 
y  be  en- 
ticulars." 
be  put  is 
ks  in  the 
otings  of 


CASH  BOOKS 

In  all  large  establishments  the  handling  of  the  cash  and  the 
care  of  the  cash  account  subdivides  among  several  persons. 
There  is  the  work  of  the  receiving  clerk  or  receiving  cashier,  and 
the  work  of  the  disbursing  clerk  or  disbursing  cashier,  both  of 
whom  handle  currency  in  comparatively  small  individual  sums,  al- 
though perhaps  aggregating  a  very  large  amount.  Beyond  this  is 
the  work  of  the  principal  cashier,  or,  in  many  cases,  the  bookkeep- 
er, who  superintends  the  petty  transactions  and  also  gives  per- 
sonal attention  to  those  more  imortant  receipts  and  disburse- 
ments evidenced  by  checks,  drafts,  &c.  The  latter  also  has 
charge,  as  a  rule,  of  the  bank  account. 

The  Self-Proving  Accounting  System  readily  lends  itself  to 
this  subdivision  of  labor  in  connection  with  the  Cash  Account. 
The  Cash  Column  Journal,  elsewhere  described,  is  the  inclusive 
account,  so  far  as  the  general  office  is  concerned,  and  may  be 
managed  under  the  immediate  direction  of  the  general  cashier,  as 
above  described.  Two  subordinate  cash  books  are  supplied  for 
his  assistants — one  known  as  Cash  Disbursements,  and  the  other 
as  Cash  Receipts.  Before  cash  can  be  disbursed  by  the  paying 
cashier  it  must  be  supplied  to  him,  and  therefore  the  Cash  Dis- 
bursement book  has  at  the  outset  a  pair  of  columns— one  en- 
titled Source  of  Funds  and  the  other  Payments — thus  permitting 
a  cash  balance  in  the  daily  settlement  between  the  subordinate 
and  the  principal.  Then  follows  a  series  of  columns  adapted  for 
classification  of  the  amounts  paid  out,  in  a  way  to  facilitate  the 


!i 


-' 


152 


THE    SELF-PROVING 


gathering  of  the  items  into  proper  form  to  pass  them  on  to  the 
Daily  Report,  whether  made  separately  or  embodied  in  the  pages 
of  the  Cash  Journal,  as  elsewhere  described. 

The  Cash  Receipts  Record  is  similarly  provided  at  first  with 
a  pair  of  clumns,  one  of  which  is  entitled  Cash  Receipts  and  the 
other  Disposal  of  Funds.  This  pair  of  columns  also  permits  a  set- 
tlement daily  between  the  clerk  in  charge  and  the  principal 
cashier,  thus  balancing  the  book.  In  addition  to  this  pair  of  col- 
umns, it  is  provided  with  single  columns  for  properly  classifying 
and  distributing  the  items  of  receipts  in  a  way  to  facilitate  the 
making  up  of  the  daily  report,  as  above  mentioned. 


^^>.-— _..-w,,«.-«>»l 


to  the 
;  pages 

St  with 
ind  the 
s  a  set- 
rincipal 
of  col- 
ssifying 
ate  the 


BALANCE   COLUMN    LEDGER 

The  rulings  employed  in  the  ledgers  devoted  to  Purchase  Ac- 
counts, Sundry  Debtors  and  Sundry  Creditors  with  the  Self-Prov- 
ing Accounting  System  are  of  the  time-honored  debit,  credit  and 
balance  form.  In  addition  to  other  advantages  this  style  has  the 
special  merit  of  being  economical  of  paper  and  using  the  ledger  up 
completely,  without  those  waste  spaces  that  are  frequently  found 
in  full  ledgers  of  ordinary  ruling. 

At  the  head  of  each  half  page — there  being  two  accounts  to 
the  page — there  is  space  for  name,  street  and  number,  and  city, 


NAME, 

1 

t/u<xm 

laa 
V 

CITY._ 

CITY 

" r-,- 

un 

mm 

rrM 

Dr. 

Or. 

5    . 

tUUM 

OATI 

im 

rrm 

•h 

Or. 

£   "' 

IftUWft 

1 

~ 

- 

l_     III 

m 

UliJ 

- 

L=J 

tnu 

LUi 

Facsimile  of  Balance  Column  LEoat ..    (Copyriqht  1897  by  J.  F.  3rown  and 

A.  O.  Ki;   nf.oaE.) 

thus  recording  the  person  with  whom  the  account  is  opened  in  the 
proper  manner.  Each  account  is  ruled  with  a  Date  column  Une,  a 
small  space  for  Items,  a  column  for  Reference  to  posting  medium, 
and  then  three  money  columns — Debit,  Credit  and  Balance.  Be- 
tween credit  and  balance  columns  a  narrow  column  is  inserted, 
headed  Dr.  or  Cr.  The  usefulness  of  this  every  bookkeeper  will  ap- 
preciate at  trial  balance  time.    Whenever  the  balance  in  an  ac- 


154  THE    SELF  rROVIXG 

count  is  struck,  if  it  be  a  debit  balance.  "Dr."  is  written  in  this 
column,  or  if  a  credit  balance.  "Cr."  is  written  in  this  column, 
which  indicates  the  character  of  the  balance  without  the  necessity 
of  glancing  at  the  pencilled  footings  in  order  to  see  which  of  the 
two  amounts,  Dr.  and  Cr.,  is  the  larger. 

Every  bookkeeper  who  has  attempted  to  use  a  ledger  contam- 
ing  large  and  small  accounts,  upon  the  plan  of  employing  a  small 
space  for  an  unimportant  account  and  devoting  a  larger  space  to 
an  account  that  is  expected  to  run  for  a  considerable  penod  o 
time,  has  been  disappointed  at  the  result.    He  has  found,  .n  all 
probability,  that  his  judgment  has  erred  in  numerous  instances  and 
that  the  spaces  allotted  to  the  several  accounts  have  failed  to  cor- 
respond with  the  requirements  of  those  accounts.  The  accounts 
opened  in  the  large  spaces  have  frequently  proven  to  be  short- 
lived and  those  commenced  in  the  small  spaces  have  proven  to  be 
so  important  as  to  soon  outgrow  the  limitations  assigned,  makmg 
it  necessary  to  transfer  them  to  another  part  of  the  ledger. 

In  the  Balance  Column  Ledger  employed  with  the  Self-Prov- 
ing Accounting  System  for  Purchase  Accounts.  Sundry  Debtors 
and  Sundry  Creditors  all  the  accounts  are  ruled  of  one  dnnen- 
sion-namely.  the  depth  of  a  page.    Each  page,  therefore,  is  de- 
voted to  two  accounts,  the  form  of  the  headings  of  which  is  print- 
ed at  the  top.  When  an  account  is  finally  and  definitely  closed,  and 
the  bookkeeper  knows  that  no  further  entries  are  likely  to  be  made 
in  it.  the  remaining  space  in  the  page  may  be  utilized  for  another 
account  by  the  employment  of  a  rubber  stamp,  which  in  orm  is  a 
fac  simile  of  the  printed  head  at  the  top  of  the  account,  with  the  ad- 
dition of  the  necessary  cross  lines.  This  stamp  will  be  supplied  by 
the  publishers  of  the  ledger  on  order  at  a  very  low  price    By  this 
nJns  all  the  paper  of  the  ledger  is  used  and  the  bookkeeper  is 
saved  the  annoying  work  of  transferring  accounts  for  which  too 
little  space  has  been  allowed. 


«  I 


^iiiifiiiffi 


.j^m^ii^tiiBiii^'.'WmSii'kii'-''  Bi>«<i^.V 


a 


tmainrn<ra. 


1  in  this 
column, 
lecessity 
h  of  the 


contain- 
r  a  small 
space  to 
leriod  of 
id,  in  all 
mces  and 
:d  to  cor- 
accounts 
be  short- 
ven  to  be 
1,  making 
er. 

self-Prov- 
f  Debtors 
le  dimen- 
ore,  is  de- 
li is  print- 
losed,  and 
;o  be  made 
Dr  another 
11  form  is  a 
■ith  the  ad- 
lUpplied  by 
:e.  By  this 
(kkeeper  is 
which  too 


NOTE    RECORDS    OR    BILL    BOOKS 

The  Note  Records  supplied  with  the  Self-Proving  Account- 
ing System,  both  of  which  are  illustrated  in  one  of  the  miniature 
fac-simile  insets  of  this  book,  are  constructed  upon  the  same  lines 
as  the  Private  Ledger  and  Balance  Sheet,  the  Mercantile  Ledger, 
the  Instalment  Ledger  and  the  Cash  Journal,  so  far  as  the  char- 
acter of  the  leaves  is  concerned,  and  the  use  of  the  spaces  which 
the  pages  present.  The  Notes  Receivable  Record  and  the  Notes 
Payable  Record  are  identical  in  principle,  although  one  is  essen- 
tially the  reverse  of  the  other.  One  records  the  obligatibns  pay- 
able to  the  business  and  the  other  the  obligations  which  the  busi- 
ness must  pay  to  others. 

Both  of  the  Note  Records  are  books  of  original  entry,  in  that 
they  receive  the  record  of  the  transaction  when  a  note  receivable 
conies  into  the  establishment,  or  when  a  note  payable  is  made  and 
delivered.  They  are  also  ledgers  to  the  extent  of  keeping  the 
Notes  Receivable  and  Notes  Payable  Accounts  respectively,  al- 
though where  they  are  used  in  connection  with  the  Private 
Ledger  and  Balance  Sheet  the  summary  of  these  accounts  ap- 
pears in  the  proper  columns  in  that  book.  In  this  case  the  Note 
Records  are  posting  mediums.  The  two  Records  are  also  post- 
ing mediums,  in  that  the  entries  connected  with  the  receiving  of 
a  note  that  is  payable  to  the  business  and  the  issuing  of  a  note 
that  is  payable  by  the  business  are  posted  from  them  to  the  proper 

ledger  accounts. 

By  examination  of  the  Notes  Receivable  Record  it  will  be 


m 


II 


■-:mm 


J50  THE    8ELF-rUOVlN(} 

seen  that  the  left  hand  wide  page  provides  space  for  date  of 
entry,  description  of  paper,  time  to  run,  the  date  it  begins  to  run 
and  the  due  date,  together  with  the  atnount.     These  items  oc- 
cupy tlie  principal  part  of  the  f^rst  half  of  the  page,  while  the 
second  half  is  devoted  to  the  account  to  be  credited,  with  particu- 
lars of  the  form  in  which  the  note  is  drawn.     The  amount  column, 
i,i  which  the  amount  of  the  note  is  entered,  is  the  debit  of  the 
Notes  Receivable  Account,  the  credit  of  the  transaction  being  the 
account  of  the  person  from  whom  the  note  is  received.     Columns 
for  the  extension  of  the  credit  amounts  are  provided,  includmg 
Sales  Ledger,  Sundry  Debtors,  Cash.  Bank  and  Miscellaneous. 
The  individual  account  is  posted  from  this  Record  to  the  ledger 
in  which  the  account  is  located,  while  the  column  in  which  the 
credit  amount  is  extended  is  in  due  course  footed  for  entry  m  the 
Cash  Journal,  or  in  the  periodical  report  in  other  form,  m  the 
process  of  carrying  the  amounts  to  the  Private  Ledger. 

Turning  to  the  narrow  pages,  it  will  be  seen  that  there  is  pro- 
vided a  space  for  recording  Where  Payable,  and  following  this  a 
record  of  Collateral  and  Endorsements.     The  successive  pages 
are  devoted  to  monthly  accounts,  all  headed  Falling  Due.     Each 
of  these  monthly  accounts  has  a  debit  and  a  credit  column,  the 
debit  column  being  for  the  paper  received,  and  into  which  the 
amount  of  the  note  is  to  be  extended  on  receipt,  with  notation 
of  date,  thus  indicating  the  maturities  for  that  month.     The 
credit  column  is  for  a  corresponding  entry  when  the  paper  is 
Parted  With,  posted  from  the  right  hand  wide  page,  as  we  shall 
see  as  we  go  further  along  with  this  description.     A  special  col- 
umn is  provided  on  the  left  hand  wide  page  in  which  to  check 
the  posting  from  the  original  record  to  this  Falling  Due  page. 
In  the  same  way  a  corresponding  posting  column  is  provided  at 
the  other  extreme  of  the  book  for  keeping  record  of  the  items 
posted  to  the  same  monthly  accounts.     By  this  arrangement,  as 


I 


^i.-j-mai. 


»-t  ^.   ,uy.^>.--^--  -  ,r^a.. 


WlWW"'t*''<'**^' 


Jate  of 
to  run 
:ms  oc- 
lile  the 
particu- 
:olumn, 
t  of  the 
nng  the 
lokimns 
icluding 
laneous. 
e  ledger 
lich  the 
y  in  the 
1,  in  the 

e  is  pro- 
ig  this  a 
re  pages 
!.     Each 
imn,  the 
hich  the 
notation 
th.     The 
paper  is 
we  shall 
ecial  col- 
to  check 
lue  page. 
3vided  at 
:he  items 
2ment,  as 


Tf  I  ■!  IBlll^'. .'..'.' ;'.'-^ 


ACCOUNTING    SYSTEM 


1B7 


will  be  instantly  perceived,  there  is  presented  in  each  month  the 
record  of  the  paper  falling  due  in  that  month,  always  showing 
what  remains  unpaid  and  always  being  in  form  adapted  to  proof 
by  footing  and  comparison. 

Toward  the  end  of  the  year,  in  ordinary  business  transac- 
tions. Notes  are  received  which  fall  due  beyond  the  calendar 
year.     Occasionally,  also,  notes  are  taken  which  have  more  than 
a  year's  titne  to  run.     Space  is  provided,  therefore,  following  the 
monthlv  accounts,  for  recording  maturity  of  paper  falling  Due 
Beyond  the  Current  Year.     This  space  also  has  a  debit  and  a 
credit  column,  or  one  column  for  Received  and  another  for  Farted 
With,  thus  making  the  account  in  this  regard  show  at  all  times 
the  paper  on  hand,  and  also  facilitating  proof  by  footing  and  com- 
parison.    For  Demand  Notes  still  another  section  is  provided, 
with  a  column  for  particulars  and  also  two  amount  columns,  one 
for  Received  and  the  other  for  Parted  With.     Finally  there  is  a 
space  for  the  record  of  Interest  Payments  and  for  the  reception 
of  any  remarks  it  may  i^e  desired  to  make. 

When  a  Note  Receivable  is  received,  the  left  hand  wide  page 
or  front  of  the  book  is  used,  as  above  described.     When  a  Note 
Receivable  is  parted  with  the  reverse  operation  takes  place,  using 
the  right  hand  page  or  back  of  the  book.     In  this  latter  part  it 
will  be  seen  there  is  a  space  for  Date,  for  the  Consideration  re- 
ceived for  the  note,  or  for  the  Account  to  which  it  is  to  be  charged 
and  an  amount  column.     This  amount  column  is  marked  Credit, 
and  is  the  complement  of  the  Debit  column  in  which  the  amount 
was  entered  when  the  note  came  in.     We  therefore  have  the  debit 
and  credit  of  the  Notes  Receivable  Account  in  columns,  always 
exposed  as  the  book  is  opened.    The  balance  between  these  col- 
umns must  be  the  amount  of  paper  in  hand,  and,  in  turn,  is  the 
amount  with  which  the  Falling  Due  columns  or  monthly  accounts 
collectively  must  balance  when  the  book  is  being  proven. 


tOi^Ji^ji'mi.'^^tfiJK- 


HK"* 


1 1 


158 


THE    SELF-PROVING 


On  the  right  hand  page  several  columns  also  are  provuled, 
into  one  of  which  the  amount  of  the  debit  of  the  account  where 
paper  is  parted  with,  is  to  be  extended,  according  to  the  ledger  m 
which  it  is  located.    These  columns  include  Cash;  Bank   Sales 
Ledger,  Sundry  Debtors'  Ledger,  Purchase  Ledger  and  Miscel- 
laneous.    Where  the  original  entries  are  made  in  this  book  the 
individual  debtor  accounts  are  posted  from  it  to  the  differen 
ledgers  in  which  :hey  are  located.     In  the  case  of  the  ongmal 
entries  being  made  elsewhere,  as  with  Cash  transactions,  for  ex- 
ample, where  cash  is  received  for  a  note,  the  Bill  Book  receives  a 
transcript  of  the  entry  from  the  Cash  Book. 

In  both  the  debits  and  credits  accounts  affected  by  notes,  as 
represented  by  the  columns,  there  is  one  devoted  to  Interest  and 
Discount,  something  that  greatly  faciUtates  the  record  in  cases  of 
notes  sold  for  less  than  their  face  value  or  when  discounted  at  the 
bank,  and  also  where  interest  as  well  as  the  face  of  an  account  is 

covered  by  a  note.  .    . 

Reference  to  the  Notes  Payable  Record  will  show  that  it  is 
constructed  upon  the  same  plan,  but  is  reversed.     The  first  entry 
with  reference  to  a  note  payable  is  the  issuance  of  the  paper, 
which,  of  course,  is  a  credit  to  the  Notes  Payable  Account. 
Therefore  the  f\rst  entry  in  the  Notes  Payable  Record  is  made 
upon  the  right  hand  page,  or  in  the  back  part  of  the  book,  in- 
stead of  the  front  part.    The  credit  column  for  Notes  Payable 
Account  appears  on  this  page  and  is  opposite  the  corresponding 
or  debit  column  on  the  left  hand  wide  page.  Appropriate  columns 
corresponding  to  the  ledgers  in  which  the  individual  accounts  are 
located  are  provided  with  both  debits  and  credits.    The  narrow 
leaves  provide  monthly  accounts  for  paper  issued  and  taken  up, 
thus  showing  maturities  for  any  month.     A  Falling  Due  division 
for  paper  maturing  beyond  the  current  year  is  provided,  Mth  its 
proper  debit  and  credit  columns,  and  also  a  space  for  recording 


i^x 


ACCOUNTING    SYSTEM 


159 


ovicled, 
,  where 
idger  in 
k,  Sales 

Miscel- 
ook  the 
different 

original 
,  for  ex- 
eceives  a 

notes,  as 
erest  and 
1  cases  of 
ed  at  the 
.ccount  is 

that  it  is 
first  entry 
he  paper, 

Account, 
d  is  made 

book,  in- 
;s  Payable 
esponding 
te  columns 
xounts  are 
'he  narrow 
I  taken  up, 
lue  division 
ed,  with  its 
r  recording 


Demand  Notes,  both  issued  and  taken  up.  Narrow  pages  are 
likewise  devoted  to  a  record  of  collateral  and  endorsement. 
Where  Payable  and  record  of  Interest  Payments  and  Remarks. 

The  bill  books  here  described  may  be  used  as  component 
parts  of  a  complete  Self-Proving  Accounting  System,  or  they 
may  be  used  in  connection  with  any  adequate  system  of  book- 
keeping. Their  special  advantages  include,  among  others,  the 
graphical  representation  of  paper  falling  due  and  paid  in  the  dif- 
frent  months.  These  bill  books  are  greatly  appreciated  by 
bookkeepers,  because  they  keep  constantly  before  the  managing 
man  the  exact  condition  of  the  notes  of  the  estabUshment,  with- 
out tedious  listing  and  the  making  out  of  special  schedules  at 
frequent  intervals. 

In  the  use  of  the  Self-Proving  Note  Records  here  described 
it  should  be  observed  that  the  line  on  which  a  note  is  recorded  at 
the  time  it  is  issued  to  a  creditor  or  received  from  a  debtor.stands 
for  that  note  until  such  time  as  it  is  discharged  by  proper  pay- 
ment or  return.  The  faint  line  rulings  of  the  pages  are  for  this 
reason  numbered.  The  pages  or  folios  in  the  books  are  also  num- 
bered. The  page  numbers,  read  in  connection  with  the  line  num- 
bers, afiford  in  this  case,  as  in  others,  a  convenient  means  of  ref- 
erence to  any  line  on  a  given  page,  and  also  a  method  of  designat- 
ing the  individual  notes.  This  method  of  identifying  or  number- 
ing the  notes  which  are  received,  and  numbering  and  recording 
those  which  are  given  out,  is  found  in  practice  to  be  much  better 
than  the  common  plan  of  direct  numbering. 


iii 


'a  f 


y 


"■i 


SUSPENDED    LIST 

The  construction  of  the  Self-Proving  Suspended  List,  a 
miniature  fac-simile  of  which  is  presented  in  one  of  the  illustrative 
insets  in  this  book,  is  based  upon  the  same  principle  as  the  leading 
ledgers  herein  described — namely,  with  pairs  of  wide  leaves,  each 
of  which  carries  its  complement  of  narrow  leaves.  Those  por- 
tions of  the  wide  leaves  projecting  beyond  the  narrow  leaves 
are  reinforced  or  thickened  in  a  way  to  compensate  for  the  extra 
thickness  of  the  narrow  leaves,  thereby  providing  an  even  writing 
surface  to  whatever  page  the  book  may  be  opened.  This  rein- 
forcing is  not  shown  in  the  miniature  fac-simile. 

The  plan  upon  which  the  Self-Proving  Suspended  List  is  de- 
signed is  such  as  to  keep  it  in  balance  with  the  balance  in  a  special 
Loss  and  Gain  Account,  or  Expense  Account,  in    the    general 
books,  thus  affording  the  merchant  the  opportunity  to  watch  a 
given  account  which  he  has  thought  wise  to  close  into  Loss  and 
Gain,  with  the  same  care  that  the  account    would    have  been 
watched  among  the  so-called    live    accounts    in    the    principal 
ledgers  of  the  business.   As  accounts  are  closed  into  the  special 
Loss  and  Gain  Account,  they  are  opened  in  the  Suspended  List, 
and  as  collections  on  the  accounts  in  the  Suspended  List  are 
made  they  are  credited  to  the  special  Loss  and  Gain  Account,  to 
which  such  items  were  charged  in  first  place.    The  balance  then 
in  the  special  Loss  and  Gain  Account,  determined  by  a  compari- 
son of  the  figures,  even  though  this  comparison  be  made  aftet  the 
account  has  been  closed  into  the  general  Loss  and  Gain  Account 


. 


-. .  iiiiiitu  iiiwuiiWimmKitw 


List,  a 
istrative 
;  leading 
res,  each 
ose  por- 
w  leaves 
he  extra 
1  writing 
his  rein- 

,ist  is  de- 

a  special 
general 

watch  a 
Loss  and 
ave  been 
principal 
le  special 
ded  List, 

List  are 
icount,  to 
mce  then 

compari- 
;  aftel-  the 
I  Account 


.r^yY< 


MI>J1ATURE    FACSIMILE 


OF    THE 


SELF-PROVING    ' 

Notes  Receivable  Record 
Notes  Payable  Record,  and 
Suspended  List 


(SEE  PAGES  155  AND  160) 


COPVBIOHT  1897 

By  J.  F.  Brown  and 

A.  O.  KiTTBEDGB 


'f 


H 


u 


(■ 


^<J 


llatM  inJ  AeMpfncM  RMlilvihIa  Hm»I»8II 


ENTdY.ITC. 

OHITt 

No. 

ii<itf 

CMtk 

It 

ll»lll 

DATE,  ETC. 

^^ 

^ 

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AMtant  le  bt  CndlKd 

Onwn  10  Ordw  of 

Amountt 
RM<l¥a4 

or  Entry 

"'"''      0  Run 

DllM 

from 

Ojr 

SilM  Ltdflcr 

i«iM  ta  C/wiaM  r»rw*r4 

0 

1 

_ 

i2 

_ 

Mntfl«  and  AernptanMi  Payable  Taken  Ud 


Dilt 
Tlkto  Up 


HOW  TAKEN  UP 
(AMOunt  10  to  Cndllfil) 


Mmtunlt  Bnuihl  forward 


DEIITS 


Ptptr 
Tikan  Up 


No. 


CREDITS 


Sundry 
Crtdltori 


Purchitt 
LodQir 


InlerMi  or 
OlHOunt 


MsimaiWLiitT 


CtppllMIMJ         PlUnl  f  .mint  ttlt-Prm««  «ec«<«ll»rt  et.-««l«l«    ««•  trt-Iormlo 


i.t     ..ni.t        r  ,^i, 


>NSIDEIIED  BAD 
ULARS  OF  TRANSFER 


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CREDITS 

Data 

CONSIDERATION 
(Aioounl  to  ka  Ohar«ad) 

u 

aifiiik 

•r . 

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Parted  With 

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o 

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RECORD  or  INTEREST  PAVMCNTt 

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AND  REMARKS 

o 

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ENTRY,  ETC. 

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(liiuail  for) 

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. 

No. 


RECORD  OF  CORRESPONDENCE,  ETC. 


4 


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Matin  and  Ai!wipt«niw«  Btenlvihla  HMtlvad. 


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I. 

«M«M  I*  bt  CndlMd 

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RM«lv«d 

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_fl- 

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2 

No. 

WHERE  PAVAIIE 

, 
-^ 

1                                                                                                                                  

2 



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FALLING  DUE 


\ 

Potlid 

■■ 

■ 

HOW  TAKEN  UP 
(Account  to  ba  Crtdltad) 

DEBIT* 

No. 

■ 

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JANUARY                                          FEBBUARV                  | 

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CMtt 

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mnlk 

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•"    No. 

Day        Tiktn  Up              iHuld 

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o 

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FEBRUARY                 | 



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ll«t««  iinri  AwtpUBM*  P«y«hl«  IttiiMl 


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0 

1 

8 

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FALLING  DUE 

N* 

JANUAHV                  1                    rCBRUARV 

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0 

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s 

s 
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HOW  TAKEN  UP 

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AMOUNT 


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ACCOUNTING    SYSTEM 


161 


of  the  business,  will  show  how  much  a  trial  balance  of  the  Sus- 
pended List  should  show.    The  Suspended  List  is  a  ledger  ar- 
ranged upon  the  line  principle,  with  one  Une  devoted  to  each  ac- 
count.   At  the  outset,  therefore,  it  is  essentially  nothing  more 
than  a  list  of  the  bad  accounts  of  the  business.    There  is  provided 
first  a  column  in  which  to  record  the  date  at  which  the  account  is 
transferred  from  among  the  live  accounts  of  the  establishment. 
Then  follows  the  name  and  the  amount,  with  notation  of  the 
ledger  folio  from  which  the  account  was  transferred;  next  a  space 
for  particulars,  or  why  the  account  was  considered  bad.    Follow- 
ing this  are  twelve  narrow  pages,  each  devoted  to  a  year.    In  the 
f^rst  column  of  the  first  yearly  account  is  entered  the  amount  of 
the  account,  where  it  will  stand  until  the  succeeding  year,  and 
from  which  it  is  to  be  carried  forward  to  the  corresponding  col- 
umn in  the  succeeding  year,  diminished  by  the  credits  in  that 
interval,  if  any  credits  have  been  made.    There  are  .five  spaces 
for  credits,  each  subdivided  by  interlining,  so  as  to  make  it  possi- 
ble as  a  fact  to  credit  to  each  account  ten  payments  in  the  course 
of  a  year,  a  number  greatly  in  excess  of  what  is  usually  obtained. 
Finally,  on  each  narrow  page  is  a  column  for  the  total  credits. 

Suppose  that  an  account  has  been  entered  in  the  list  at  $150. 
Then  it  will  also  appear  on  the  first  narrow  page  or  the  first  yearly 
division  in  the  amount  of  $150.  Suppose  also  that  during  the 
first  year  two  payments  of  $25  each  have  been  made.  These  are 
noted  in  the  columns  entitled  Credits  and  Their  Dates.  At  the 
fend  of  the  year  they  are  summed  up  and  extended  into  the  col- 
■  umn  entitled  Total  Credits.  For  carrying  forward  into  the  new 
year  the  total  of  the  credits  in  this  case— $50— would  be  sub- 
tracted from  the  amount  of  the  indebtedness— $150— and  the 
difference  carried  forward  with  which  to  start  the  account  for 

the  second  year. 

'       By  turning  the  page  it  will  be  seen  that  the  second  year's  bal- 


i-»n-  '^-■-^.■n|>^^-^■a^^  ■^if'mi-Tn-iT«-.Ti.ga-.- 


162 


THE    SELF-PROVING 


ance,  by  this  plan,  is  contrasted  with  the  original  amount  with 
which  the  debtor  stood  charged  when  the  account  was  opened  in 
the  Suspended  List,  and  as  each  successive  page  is  similarly 
turned  the  diminishing  balance,  if,  fortunately,  it  is  a  diminishing 
balance,  is  brought  against  his  name  and  directly  in  contrast  with 
the  original  amount. 

With  the  twelve  pages  provided  in  the  book,  there  is  the  op- 
portunity of  watching  an  account  twelve  years,  or  the  book  in  use 
may  be  considered  to  cover  a  space  of  twelve  years.  The  narrow 
pages  are  dated  successively  for  the  years,  and,  as  new  accounts 
are  brought  into  the  list  after  the  first  year,  their  amounts  are 
entered  upon  the  pages  corresponding  with  the  years  that  they 
are  transferred.  By  this  arrangement  there  follows  that  the  total 
of  the  amount  column  on  the  f^rst  page  will  always  represent  the 
total  of  the  bad  accounts  of  the  business,  from  the  time  that  this 
book  is  commenced  forward,  while  the  footings  of  the  balance 
column  for  each  of  the  yearly  divisions  will  show  the  amount  of 
these  bad  debts  outstanding  at  that  date.  In  the  same  manner 
the  total  credits  for  the  years  are  shown  in  the  credit  columns  in 
the  successive  yearly  spaces. 

Turning  to  the  second  wide  page,  it  will  be  noticed  that 
space  is  provided  for  noting  the  name  and  residence  of  the  attor- 
ney to  whom  the  account  has  been  turned  over  for  collection,  the 
date  when  it  was  so  delivered  to  him,  and  also  a  record  of  judg- 
ments, together  with  reference  to  correspondence. 
-:  The  horizontal  lines  are  numbered,  and  the  Une  on  which  a 
debtor's  account  is  originally  entered  stands  for  that  account  as 
long  as  it  is  carried.  By  combining  the  line  numbers  with  the 
page  numbers  a  reference  to  any  particular  account  is  obtained, 
6o  definite  in  character  as  to  make  it  available  for  reference  in- 
stantly. 


pjuiipi'iw«.i.»wWpW»* 


lount  with 
i  opened  in 
3  similarly 
liminishing 
ntrast  with 

e  is  the  op- 
)ook  in  use 
rhe  narrow 
w  accounts 
(nounts  are 
5  that  they 
It  the  total 
present  the 
le  that  this 
the  balance 
amount  of 
me  manner 
columns  in 

oticed  that 
if  the  attor- 
llection,  the 
)rd  of  judg- 

on  which  a 
account  as 
irs  with  the 
is  obtained, 
eference  in- 


EXPENSE  RECORD  AND  LEDGER 

A  combined  Expense  Record  and  Ledger  is  supplied  for  use 
with  the  Self-Proving  Accounting  System,  in  those  lines  of  busi- 
ness where  expense  items  are  very  numerous,  and  where  the  ex- 
penses are  largely  cash  items.  The  book  is  constructed  upon  the 
same  general  plan  as  prevails  with  the  other  principal  books  of 
the  system.  It  is  composed  of  pairs  of  wide  leaves,  between  which 
are  a  number  of  narrow  leaves.  The  projecting  parts  of  the  wide 
leaves  are  reinforced  or  thickened  to  compensate  for.  the  thick- 
ness of  the  narrow  leaves. 

The  ruling  of  the  book  is  such  that  when  the  first  or  left 
hand  wide  page  is  opened,  with  all  the  narrow  leaves  turned 
against  the  second  or  right  hand  wide  page,  there  are  presented 
the  portions  of  the  book  adapted  to  receive  the  original  entry  and 
the  distribution  of  the  amounts  among  the  columns  standing  for 
the  different  ledger  accounts  in  the  Private  Ledger.  The  rulings 
on  the  several  narrow  pages,  and  on  that  portion  of  the  second 
wide  page  which  is  covered  by  the  last  narrow  leaf  turned  against 
it.  are  devoted  to  the  Individual  Expense  Accounts  in  pairs  of 
columns,  into  which  the  items  of  expense  are  extended  from  time 
to  time. 

In  the  ruling,  space  is  provided  for  date  of  entry,  names  of 
accounts,  both  debit  and  credit;  posting  references,  both  debit 
and  credit,  and  a  pair  of  columns  for  total  of  expenses  or  Expense 
Ledger.  These  latter  columns  would  post  by  footings  to  the 
Expense  Account  in  the   Private   Ledger.     Following   to    the 


'•tflt iwvivTf 


1,   I 


164 


THE    SELr-PROVINQ 


right,  by  way  of  distributing  columns,  arc  pairs  marked  Cash, 
Sundry  Creditors,  Purchase  Ledger,  Sundry  Debtors,  Instahnent 
Ledger  and  Miscellaneous.  There  are  also  blanks  permitting  a 
further  addition  to  the  distributing  columns  to  accommodate 
special  schemes  of  classification. 

The  Expense  Accounts  distributing  through  the  narrow 
pages,  including  those  which  are  commonly  required  in  a  mercan- 
tile business,  are  as  follows :— Wages  and  Salaries,  Advertising, 
Rent,  Interest  and  Discount,  Cartage  and  Storage,  Fuel  and 
Light,  Stationery  and  Supplies,  Rebates  and  Allowances,  Legal 
Expenses,  Taxes  and  Insurance,  Telephone  and  Telegraph,  Car- 
fare and  Messenger  Service,  Repairs  and  Breakage.  There  is  also 
an  account  for  Unclassified  Expenses  and  several  pairs  of  columns 
with  blank  heads,  thus  permitting  additional  accounts  required  in 
special  cases. 


Ii  l"*! 


:ked  Cash, 
Instalment 
rmitting  a 
ommodate 

he  narrow 
I  a  mercan- 
.dvertising, 
,  Fuel  and 
ices,  Legal 
jraph,  Car- 
here  is  also 
of  columns 
required  in 


\ 


•» 


INDEXING 

In  connection  with  the  Mercantile  Ledger  and  the  Instal- 
ment Ledger,  as  well  as  in  other  individual  ledgers  that  may  be 
opened  in  a  set  of  books  managed  upon  the  Self-Proving  Ac- 
counting plan,  there  should  be  employed  a  good  name  mdex. 
Selection  should  be  made  from  the  considerable  number  of  most 
excellent  articles  of  this  kind  that  are  in  the  market,  accordmg 
to  the  number  of  accounts  and  the  bookkeeper's  preferred  plan 
of  indexing.    There  is  nothing  peculiar  about  the  Self-Provmg 
System  in  the  matter  of  indexing,  save  that  instead  of  the  ac- 
counts being  indicated  by  page  numbers  in  the  index,  they  are 
indicated  by  account  numbers,  composed,  as  explamed  m  other 
parts  of  this  volume,  of  the  page  number  of  the  ledger  read  m 
conjunction  with  the  line  number  of  the  page. 

Where  accounts  are  transferred  from  one  ledger  to  another, 
as  at  the  close  of  the  year,  it  is  of  advantage,  so  far  as  possible,  to 
manage  the  transferring  in  a  way  to  give  the  accounts  earned 
forward  the  same  numbers  the  succeeding  year.  If  the  book- 
keeper has  learned,  for  example,  that  an  account  to  which  he  has 
occasion  to  refer  very  frequently  is  No.  483.  and  that  aumber  is 
associated  in  his  mind  with  the  name  of  a  customer,  then  it  is  an 
advantage  in  transferring  the  account  to  continue  No.  483  i" 
connection  with  that  name.  This  precaution  saves  unlearmng 
the  old  number  and  learning  a  new,  and  diminishes,  accordingly, 
the  amount  of  reference  that  would  be  made  to  the  name  index. 


.    ■  1 ' 


I   , 


1' 


les 


THE    SELF-PROVINQ 


There  is  no  other  reason  than  this  for  transferring  to  the  same 
position  in  the  new  ledger. 

In  the  Intahnent  Ledger,  in  view  of  the  fact  that  each  ac- 
count is  indexed,  not  only  in  the  name  index  but  also  upon  the 
customer's  card  and  upon  the  street  index,  this  reason  has  addi- 
tional force.  Where  accounts  are  transferred  in  this  manner,  giv- 
ing the  old  accounts  the  same  numbers  in  the  new  year  that  they 
have  had  in  the  old,  there  will  necessarily  be  an  irregular  filling  up 
of  the  new  ledger.  This  would  at  first  seem  to  be  a  difficulty  in 
the  way  of  the  plan,  but  when  the  facts  of  the  case  are  properly 
considered,  it  is  not  so  great  an  objection  as  would  at  first  be 
supposed.  New  accounts,  as  they  come  alon^^:,  are  entered  in 
the  blank  spaces  that  are  left,  so  that  in  the  end  the  book  is  com- 
pletely fdled  in  practically  the  same  shape  as  would  have  been  the 
case  if  the  accounts  had  been  transferred  from  the  old  year  in 
their  natural  order.  ,      > 


-r        ' 


'         ?'.. 


\. 


the  same 


each  ac- 
upon  the 
has  adcH- 
nncr,  giv- 
that  they 
filHng  up 
fticulty  in 
;  properly 
it  first  be 
nterecl  in 
>k  is  com- 
:  been  the 
d  year  in 


t> 


PART    III 
THE   SELF-PROVING 

ACCOUNTING  SYSTEM 

APPLIED   TO   THE 

INSTALMENT    BUSINESS 


Mpanpwm 


GROWTH    OF    THE    INSTALMENT  BUSINESS 


The  rapid  growth  of  the  instalment  business  the  last  few 
years,  not  only  in  the  furniture  trade,  but  in  various  other  branches, 
is  one  of  the  marked  features  of  the  period.  In  response  to  a 
popular  demand,  thousands  of  merchants,  not  only  in  this  coun- 
try, but  in  other  countries  as  well,  have  organized  credit  depart- 
ments or  have  converted  their  entire  enterprises  into  credit  stores, 
and  are  now  selling  goods  upon  what  is  known  as  the  instalment 
plan.  Thousands  of  other  merchants,  drawn  to  this  subject  by  the 
success  of  their  neighbors,  are  at  present  studying  the  question, 
with  a  view  to  opening  credit  departments. 

The  reasons  for  the  phenomenal  growth  of  the  instalment 
business  are  not  hard  to  discover.  The  great  majority  of  the 
buyers  of  all  the  classes  and  kinds  of  goqds  that  are  sold  by  retail 
dealers  are  persons  in  the  receipt  of  weekly  or  monthly  incomes. 
They  are  wage-earners,  paid  at  stated  intervals,  and,  for  the  most 
part,  frugal  and  honest  people,  quite  as  much  entitled  to  credit  on 
their  purchases,  so  far  as  concerns  their  integrity  of  purpose,  as  the 
ordinary  rank  and  file  of  business  men.  They  are  not  experienced 
financiers,  however,  nor  have  they  the  property  basis  of  credit 
ordinarily  exacted  in  credit  transactions  among  business  men. 
Their  wants  in  the  matter  of  household  equipment,  including  such 
articles  as  carpets,  furniture,  musical  instruments,  sewing  ma- 
chines, bicycles,  books,  and  so  on  to  the  end  of  a  considerable  list, 
are  well  defined,  and  they  are  abundantly  able  to  purchase  such 
articles  with  a  fair  degree  of  liberality,  provided  only  the  oppor- 


?W"»*"W^ 


iii.tflVn-^ff'nn'^ 


170 


THE    SELF-PROVING 


tunity  is  afforded  them  of  paying  for  the  same  in  reasonable  instal- 
ments from  their  wages  or  salaries  as  the  same  may  be  received. 

Credit  on  the  ordinary  basis  these  people,  as  already  stated, 
cannot  comniand — first,  from  lack  of  property  or  capital  qualifi- 
cation, and,  second,  because,  as  a  rule,  they  are  not  good  enough 
managers  to  enable  them  to  carry  through  a  transaction  without 
a  certain  amount  of  business  assistance.     The  lack  of  the  first  is 
supplied  in  the  instalment  business  by  the  sales  being  made  under 
a  lease  or  contract,  with  the  title  of  the  goods  remaining  with  the 
seller  as  security  until  the  final  payment  is  made.     A  safe  instal- 
ment business,  therefore,  is  necessarily  restricted  to  articles  of 
enduring  value,  like  furniture,  musical  instruments,  books,  ma- 
chines, and  the  like.     It  cannot  be  founded  upon  articles  that  are 
at  once  consumed,  like  groceries,  confectionery,  etc.,  nor  yet  can 
it  be  so  satisfactorily  based  upon  ordinary  wearing  apparel,  al- 
though this  plan  of  selling  clothing  to  both  men  and  women  is 
very  widely  practised  in  certain  communities,  and  successfully, 
too,  when  measured  by  the  resulting  profits.     The  second  condi- 
tion is  supplied  by  the  business  system  of  the  instalment  dealer 
through  which  the  customers  are  induced  to  pay  promptly  at  reg- 
ular intervals,  according  to  the  terms  upon  which  the  sales  are 
made. 

The  instalment  business  is  profitable,  because  the  price  at 
which  the  goods  are  sold  upon  this  plan,  including,  as  is  proper 
that  they  should,  a  sufficient  allowance  for  the  costs  of  doing 
business,  interest  on  the  time  payments  and  something  for  the  bad 
debts  and  unusual  expenses  which  occasionally  occur,  reaches  fig- 
ures that  are  very  attractive  to  the  merchant.  At  the  same  time 
the  prices  are  not  excessive,  from  the  standpoint  of  the  buyer,  in 
view  of  the  terms  of  payment  that  are  extended  to  him  and  the  fact 
of  his  having  the  use  of  the  goods  from  the  beginning.  Most  buyers 
are  willing  to  give  a  little  more  for  any  article  of  merchandise 


lable  instal- 
received. 
ady  stated, 
lital  qualifi- 
>od  enough 
on  without 

the  first  is 
made  under 
ng  with  the 

safe  instal- 
•  articles  of 
books,  ma- 
ples that  are 
nor  yet  can 
apparel,  al- 
d  women  is 
successfully, 
icond  condi- 
ment dealer 
iptly  at  reg- 
he  sales  are 

the  price  at 
as  is  proper 
sts  of  doing 
g  for  the  bad 
,  reaches  fig- 
le  same  time 
the  buyer,  in 
I  and  the  fact 
Most  buyers 
merchandise 


ACCOUNTING    SYSTEM 


m 


when  paym'ii':  is  to  be  made  at  some  future  time,  than  when  cash 
in  hand  is  exacted.  All  these  considerations,  and  others  which  it 
is  not  necessary  to  enumerate  in  this  connection,  make  the  instal- 
ment business  especially  attractive  to  the  merchant. 

Nor  is  the  instalment  business  surrounded  by  such  difficul- 
ties of  management  as  to  make  it  unsatisfactory  in  its  conduct. 
On  the  contrary,  when  equipped  with  proper  facilities  in  each  of 
its  several  divisions — the  sales  department,  the  office  or  book- 
keeping department,  the  delivery  department  and  the  collection 
department — it  runs  as  smoothly  as  any  other  form  of  business 
with  which  it  might  be  compared,  and  with  far  less  fret  and  worry 
to  the  merchant  than  many  other  forms  of  retail  trade. 

The  instalment  business  has  various  advantages  peculiarly  its 
own.     The  income,  based  as  it  is  upon  stated  weekly  or  monthly 
payments  upon  account,  is  a  constant  and  unvarying  quantity,  ir- 
respective of  the  volume  of  sales  for  the  time  being.     The  busi- 
ness seldom  knows  a  dull  period,  so  far  as  income  or  cash  receipts 
are  concerned.     Suitably  organized,  an  instalment  store  is  a  great 
business  machine,  grinding  without  intermission  and  producing  a 
constant  result.     Properly  conducted,  a  business  upon  the  instal- 
ment plan  is  one  of  the  safest  enterprises  upon  which  a  merchant 
can  embark.     This  assertion  is  made,  notwithstanding  the  fact 
that  at  the  hands  of  the  commercial  agencies  instalment  merchants 
very  seldom  receive  the  credit  rating  to  which  their  prosperity 
would  justly  entitle  them.     The  lack  of  rating  in  the  past,  as  is 
freely  admitted,  has  been  largely  influenced  by  the  somewhat  care- 
less manner  in  which  the  business  has  been  conducted  by  some  of 
the  pioneers  in  the  line  and  the  loose  ends  about  their  establish- 
ments which  have  been  manifest  even  to  casual  observers.     All 
this  has  been  changed,  however,  for  now,  under  the  leadership  of 
the  more  progressive  instalment  dealers,  the  business  has  become 
an  exact  science,  and  with  the  use  of  the  bookkeeping  system 


172 


THE    SELF-PROVING 


which  it  is  the  purpose  of  this  volume  to  describe  and  make  known 
it  is  in  better  control,  even  at  the  hands  of  men  of  limited  com- 
mercial talent,  than  almost  any  other  plan  of  business  with  which 
it  might  be  contrasted. 

It  is  practically  impossible  to  consider  a  bookkeeping  system 
apart  from  what  in  contrast  therewith  may  be  called  the  business 
administration  of  the  establishment.    While  it  is  the  special  ob- 
ject of  this  work  to  illustrate  a  system  of  accounts  for  the  instal- 
ment business,  the  book  goes  mucl  further  and  discusses  various 
other  details  of  the  instalment  business,  covering  such  matters  as 
sales,  deliveries,  collections,  the  nature  of  the  lease  or  contract 
and  the  course  which  it  is  expedient  for  the  instalment  merchant 
to  pursue  in  handling  delinquent  accounts,  in  recovering  goods 
from  customers,  in  resorting  to  legal  measures,  etc.     The  several 
chapters  of  the  book,  and  all  the  items  of  advice  that  it  contains, 
are  based  upon  practical  experience  aiid  reflect  the  views  of  those 
who  have  made  a  careful  study  of  the  business  in  all  its  details 
through  a  series  of  years,  wherein  it  has  been  most  successfully 
conducted. 


MM 


Wjm'.BWMiaM1  CiTTTiSa 


"--' — .■    ■■■■  ■■'■■>'  ■ 


nake  known 
mited  com- 
with  which 


ping  system 
the  business 
;  special  ob- 
»r  the  instal- 
isses  various 
h  matters  as 

or  contract 
nt  merchant 
^ering  goods 

The  several 
t  it  contains, 
iews  of  those 
all  its  details 
t  successfully 


BENEFICENCE    OF   RETAIL   CREDITS 

Many  merchants  enter  upon  the  instalment  business  as  a  mere 
feature  of  trade  and  for  the  profit  there  is  in  it,  without  a  thought 
as  to  its  economic  value  or  the  beneficial  influence  that  it  exercises 
upon  the  wage-earning  class. 

Many  volumes  have  been  published  in  praise  of  the  savings 
banks,  and  the  end  of  the  literature  of  that  sort  has  not  yet  been 
reached.  Numerous  other  books  have  been  written  extolling 
building  associations  and  commending  them  in  the  highest  terms 
because  they  provide  a  means  whereby  wage-earners,  without 
previous  accumulation  of  savings,  can  buy  and  own  their  homes. 
Much  has  also  been  written  in  praise  of  Hfe  insurance,  a  scheme 
whereby  future  benefits  are  secured  to  wage-earners  by  the  in- 
vestment of  a  portion  of  their  weekly,  monthly  or  yearly  incomes. 

Very  little,  on  the  contrary,  has  been  put  forth  commending 
the  instalment  business,  and  yet  the  instalment  business  is  entitled 
to  the  same  praise,  in  kind  if  not  in  degree,  as  belongs  to  one  or 
the  other  of  the  schemes  of  saving  just  enumerated.  Without 
the  instalment  plan  of  purchase  there  is  many  a  husband  and  wife 
that  would  struggle  for  years  to  save  enough  money  to  furnish  a 
modest  house  decently,  and  meanwhile  would  be  raising  their 
family.  A  dwelling  they  can  rent  or  buy  through  a  building  as- 
sociation. Furniture  they  cannot  rent,  and,  aside  from  the  oppor- 
tunity oflfered  by  the  instalment  plan,  they  cannot  buy.  Through 
the  instalment  plan,  however,  all  necessary  household  comforts 
are  at  their  command  from  the  beginning. 


, 


174 


THE    SELF-PROVING 


Contrast,  then,  the  relative  position  of  two  families — one  that 
struggles  through  years  of  privation  to  accumulate  the  money  to 
buy  a  household  equipment,  and  the  other,  through  the  bene- 
ficence of  the  instalment  system,  that  has  the  use  of  the  household 
equipment  during  the  time  that  it  is  being  paid  for.  Certainly  it 
were  wise  and  prudent  and  far  better  for  the  children  to  have  the 
advantages  of  a  furnished  home  from  the  start  than  to  suffer  pri- 
vation and  distress  while  saving  the  money  to  buy  for  cash. 

The  same  principle  applies  to  the  student  with  respect  to  the 
books  that  he  needs  by  way  of  a  library  of  reference;  also  to  the 
small  manufacturer  who  needs  machinery  for  the  economic  pro- 
duction of  goods,  and  to  numerous  others  in  various  walks  of  life 
who  must  either  elect  to  go  without  that  which  adds  to  comfort 
or  income,  or  accept  the  offer  of  the  instalment  dealer  to  supply 
the  articles  they  so  much  need. 

The  instalment  business  is  entitled  to  a  position  of  honor  in 
the  estimation  of  economists  and  philanthropists  nearly,  if  not 
quite,  as  high  as  that  accorded  to  life  insurance.  Life  insurance 
has  long  since  ceased  to  be  argumentative.  It  is  no  longer  re- 
garded as  a  thing  of  possible  advantage.  It  is  now  declared  to  be 
a  necessity,  and  that  man  admittedly  does  wrong,  no  matter  what 
his  circumstances,  who  does  not  make  use  of  the  advantages  which 
it  offers.  Contrast  the  position  of  two  men — one  who  saves  a 
hundred  dollars  and  puts  it  away  in  the  savings  bank,  thereby 
making  some  provision  for  old  age,  and  the  other,  who,  saving 
from  his  earnings  the  same  amount,  invests  it  in  a  term  endowment 
insurance  policy.  Leave  out  of  the  question  for  the  moment  the 
advantage  to  the  family,  in  the  event  of  the  death  of  the  insured 
man  during  the  years  that  the  accumulations  are  being  made  and 
set  aside.  Certainly,  all  circumstances  considered,  the  argument  is 
greatly  in  favor  of  the  man  who  makes  use  of  the  facilities  which 
life  insurance  companies  provide,  and  thereby  gets  in  lump  at  the 


5 — one  that 
e  money  to 

1  the  bene- 

2  household 
Certainly  it 
to  have  the 
D  suffer  pri- 
:ash. 

spect  to  the 
also  to  the 
•nomic  pro- 
,valks  of  life 
to  comfort 
If  to  supply 

of  honor  in 
arly,  if  not 
e  insurance 
)  longer  re- 
clared  to  be 
natter  what 
tages  which 
vho  saves  a 
nk,  thereby 
ivho,  saving 
endowment 
noment  the 
the  insured 
g  made  and 
argument  is 
ilities  which 
lump  at  the 


ACCOUNTING    SYSTEM 


in 


end  of  the  contract  period  an  amount  considerably  in  excess  of  the 
aggregate  of  principal  and  interest  on  the  payments  he  has  made. 

Next  consider  the  position  and  circumstances  of  the  same 
men,  or  two  others  in  like  position  of  earnings,  with  respect  to  the 
equipment  of  their  homes.  With  the  same  amount  saved,  one 
lays  it  aside  for  a  future  purchase,  while  the  other  buys  at  the 
outset  and  pays  from  time  to  time  on  account  of  things  which  are 
in  daily  and  satisfactory  use.  It  must  be  clear  to  every  one  that 
the  latter  has  much  the  best  of  the  bargain,  so  far  as  his  own  and 
his  family's  comfort  is  concerned,  and  that  he  is  in  reality  the  better 
member  of  society  and  more  useful  in  his  community. 

The  economies  of  most  men  are  the  results  of  necessity.  Men 
do  not  spend,  because  they  do  not  have  the  money.  Artificial 
restraints  are  sometimes  as  potent  in  this  regard  as  those  deter- 
mined by  general  conditions.  Accordingly,  we  find  that  men  are 
made  severely  economical  by  the  desire  to  save  money  to  meet 
the  dues  of  the  building  association,  which  stand  for  the  security 
of  tlie  home;  to  pay  the  premiums  upon  their  life  insurance  pol- 
icies, which,  in  the  event  of  death,  are  the  guarantee  of  support  of 
wife  and  children,  and  likewise  to  meet  the  payments  on  their 
instalment  purchases  of  household  goods,  because  these  articles 
represent  so  much  of  the  comfort  and  cheer  of  their  homes. 

There  are  those  who  carp  at  all  instalment  transactions  be- 
cause the  instalment  system  in  some  isolated  case  has  been  used 
harshly,  to  the  injury  of  the  buyer.  This,  however,  does  not  prove 
the  general  rule.  Building  associations  in  the  past  have  also  been 
mismanaged  and  the  faith  of  the  shareholders  sadly  abused.  Life 
insurance  of  a  fraudulent  character  before  now  has  thrown- dis- 
credit upon  the  whole  insurance  system,  and  it  is  to  be  admitted 
that  unscrupulous  instalment  dealers  have  sometimes  mistreated 
their  customers.  Still  the  world  at  large  knows  that  there  are 
honest  and  safe  building  associations  and  reliable  life  insurance 


176 


THE    SBLF-PROVINQ 


companies,  while  hundreds  of  thousands  of  people  all  over  the 
country  stand  ready  to  bear  witness  to  the  advantages  which  in- 
talment  purchases  have  been  to  them. 

The  modern  instalment  dealer,  in  his  own  interest,  is  both 
patient  and  considerate.     He  has  no  sympathy  with  the  lustful 
greed  which  led  to  the  mistakes  of  some  of  the  pioneers  in  the 
trade.     With  a  safe  business  in  hand  and  assured  of  a  fair  profit  on 
his  transactions,  he  is  fully  conscious  of  the  good  he  can  do  and 
the  benefit  he  can  confer  upon  honest  people,  who,  without  the 
favors  he  is  in  position  to  extend,  would  be  deprived  of  many  of 
the  comforts  of  life.     Nor  does  he  stop  here.     He  knows  the  bene- 
ficial influence  that  his  collection  department  can  exert,  and  he 
remembers  how  prone  men  are  to  spend  money  fooHshly  before 
paying  their  obligations,  if  not  promptly  reminded  of  them  when 
the  money  is  received,  and,  therefore,  he  firmly  enforces  the  terms 
of  the  agreement  relating  to  payments.     In  cases  of  sickness  and 
distress,  however,  he  cheerfully  waives  his  rights  and  patiently 
waits  until  conditions  improve.      Philanthropy   combined   with 
business  is  practically  illustrated  at  the  hands  of  every  honest  and 
enterprising  instalment  dealer. 


I  ilfr  i  I    rtiilfT-r; 


1  over  the 
i  which  in- 

st,  is  both 
the  lustful 
eers  in  the 
ir  profit  on 
:an  do  and 
without  the 
of  many  of 
rs  the  bene- 
ert,  and  he 
shly  before 
them  when 
s  the  terms 
ickness  and 
d  patiently 
bined   with 
honest  and 


THE    SELF -PROVING    ACCOUNTING    SYSTEM    AP- 
PLIED   TO    THE    INSTALMENT    BUSINESS 

The  instalment  business,  to  which  more  particular  reference  is 
made  in  the  pages  following,  is  that  of  furniture  and  household 
goods  in  general,  and  therefore  the  blanks  and  forms  that  are 
shown  are  for  the  most  part  particularly  suited  to  that  trade. 
The  adaptability  of  the  system  of  bookkeeping  here  explained  to 
other  branches  of  the  instalment  business,  in  whole  or  in  part,  will 
be  apparent  upon  examination,  and  therefore  it  has  not  been 
deemed  necessary  to  go  out  of  the  way  for  special  illustrations. 

The  business  of  an  instalment  dealer  handling  furniture  and 
household  goods  in  general  very  naturally  divides  into  several 
leading  departments,  among  which  may  be  mentioned  the  Sales 
Department,  wherein  the  agreement  with  the  customer  as  to 
terms  of  payment,  etc.,  is  arranged;  the  Delivery  Department, 
through  which  the  goods  that  have  been  sold  are  sent  to  the  pur- 
chaser, and  the  Bookkeeping  or  Office  Department,  wherein  are 
kept  the  accounts  with  customers.    This  latter  also  receives,  di- 
rectly or  indirectly,  the  payments  as  they  are  made,  and  in  addi- 
tion attends  to  the  buying  of  goods  and  the  paying  for  the  same. 
At  the  same  time  it  exercises  a  general  supervision  over  all  the 
other  divisions  of  the  business.     Still  another  and  very  important 
division  is  that  of  Collections,  which,  by  reason  of  its  intimate  asso- 
ciation with  the  office,  is  very  generally  considered  a  subdivision 
of  that  department.     Finally  there  is  the  Legal  Department,  more 


178 


THE    SELF-PROVING 


or  less  sharply  defined,  to  which  are  referred  all  questions  of  seizure 
of  goods  and  replevin  and  the  problems  of  collections  wherever 
there  are  apparent  the  elements  of  fraud  and  dishonesty.  The 
Self-Proving  Accounting  System  subdivides  in  a  way  to  accommo- 
date its  records  to  each  of  these  departments,  showing  its  opera- 
tions in  detail,  while  also  at  all  times  correctly  showing  the  busi- 
ness as  a  whole. 


ns  of  seizure 
ns  wherever 
nesty.  The 
o  accommo- 
ig  its  opera- 
ng  the  busi- 


HOVV  TO   INSTAL  A   NEW   OFFICE   SYSTEM 

Much  time  is  saved  when  a  new  business  or  accounting  system 
is  to  be  introduced,  as  well  as  expense  and  annoying  mistakes 
avoided,  by  securing  in  advance  the  assistance  of  some  one  who  is 
abundantly  able  to  answer  all  the  various  questions  that  arise  and 
suitably  direct  each  of  the  persons  in  the  several  departments  as  to 
his  new  lines  of  duty  so  far  as  the  system  makes  changes.     This  is 
true  irrespective  of  the  Self-Proving  Accounting  and  Business 
System,  and  it  is  true  also  of  it.     Accordingly  in  adopting  this  sys- 
tem merchants  are  urged  to  arrange  for  expert  help  and  to  fix  a 
date  that,  while  serving  their  convenience  so  far  as  making  the 
change  is  concerned,  will  also  permit  of  a  little  preliminary  study 
upon  the  part  of  the  expert  as  to  their  exact  needs. 

There  are  no  two  establishments  that  are  run  exactly  alike 
and  that  require  identically  the  same  outfit.  One  will  want  more  of 
this  and  less  of  some  other  item,  and  others  vice  versa.     Therefore 
a  business  engineer  should  be  called  in.     It  is  his  duty  to  look  over 
the  establishment,  to  confer  with  the  proprietor  and  bookkeeper 
as  to  the  special  wants  of  the  case  so  far  as  they  see  them  and  to 
converse  with  the  heads  of  all  the  several  departments  in  order  to 
learn  from  them  exactly  how  the  business  has  heretofore  been 
run.     By  this  means  he  obtains  a  clear  insight  into  all  special  re- 
quirements.    His  next  step  is  to  show  the  proprietor  in  considera- 
ble detail  what  may  be  accomplished  by  the  use  of  the  different 
features  of  the  Self-Proving  System  and  how  variations  may  be 
introduced  for  the  purpose  of  facilitating  one  result  or  another. 


,r— 


mmiiiMiiip»TfTii-n 


180 


THE    SELF-PROVING 


according  to  special  ideas.  After  having  determined  in  this  man- 
ner what  it  is  expedient  to  do,  the  plan  is  next  reduced  to  formal 
shape,  thereby  indicating  just  what  changes  are  necessarv  to  be 
made  in  each  of  the  several  departments,  what  new  features  are  to 
be  introduced,  what  new  equipment  is  necessary  and  what  varia- 
tions may  be  advantageously  made  in  the  force  employed. 

When  this  plan  of  operations  has  been  formally  drawn  up  and 
has  receix  ed  the  sanction  of  the  proprietor,  a  date  is  agreed  upon 
when  the  changes  shall  be  introduced,  and  then  they  are  made 
under  the  supervision  of  the  engineer  or  his  assistant,  with  the 
result  that  the  old  is  abandoned  and  the  new  installed  without  jar 
to  the  business  anywhere  and  without  any  loss  of  time  or  unneces- 
sary expense. 

The  publishers  of  this  book  are  in  position  to  supply  expert 
help  or  business  engineering  for  the  purposes  here  described,  and 
are  always  glad  to  correspond  with  those  who  may  be  contemplat- 
ing a  change  in  their  business  system.  Prices  for  such  engineer- 
ing assistance  are  subject  to  negotiation  and  will  be  quoted  when- 
ever the  circumstances  of  the  case  have  been  made  known. 


-mimmmm' 


n  this  man- 
d  to  formal 
ssarv  to  be 
tures  are  to 
what  varia- 
ed. 

awn  up  and 
igreed  upon 
y  are  made 
It,  with  the 
without  jar 
or  unneces- 

ipply  expert 
scribed,  and 
contemplat- 
:h  engineer- 
uoted  when- 
own. 


DATE  FOR  MAKING  CHANGES 

Many  merchants  labor  under  the  impression  that  changes 
in  their  accounting  systems  are  only  possible  on  the  ist  of  Jan- 
uary     If  their  inventories  are  regularly  taken  at  this  date  there 
is  some  reason  for  this  opinion,  but,  on  the  other  hand,  with  holi- 
day trade  and  other  conditions  prevailing  at  the  turn  of  the  year, 
January  is  seldom  the  best  date  at  which  to  take  account  of  stock 
and  close  the  books.     Broadly  stated,  that  date  is  best  for  m- 
ventorying  when  business  is  most  slack  and  when  practically  the 
entire  force  of  the  establishment  can  be  employed  upon  the  special 
work  required  without  neglecting  the  routine  features  of  the  busi- 

ness. 

The  Self-Proving  Instalment  Ledger  and  other  books  shown 
in  this  volume  are  ordinarily  printed  for  the  calendar  year-that  is, 
with  the  f^rst  division  devoted  to  January  and  the  last  to  Decem- 
ber It  frequently  occurs,  however,  that  a  want  is  expressed  for 
books  arranged  to  commence  with  July  or  some  month  other  than 
January.  The  publishers  are  always  ready  to  meet  such  require- 
ments and  on  order  to  send  out  books  printed  to  agree  with  any 
fiscal  year  that  may  be  described. 

On  the  other  hand,  the  Instalment  Ledger,  and  other  books 
printed  with  monthly  divisions  agreeing  with  the  calendar  year, 
may  be  used  as  they  are  for  fiscal  years  varying  therefrom  with- 
out other  changes  than  can  be  made  by  the  employment  of  a  rub- 
ber stamp  to  vary  the  dates,  or  these  changes  in  months  may  be 
made  with  the  pen.     Further,  the  books  may  be  used  without 


M  H 


:^^' 


imuiimiiM 


182 


THK    SELF-I'ROVIXO 


even  ch.ingiriK  the  dates  simply  by  opening  the  ledger  with  the 
bal.ince  transferred  to  the  month  in  which  the  work  is  begun, 
leaving  blank  the  months  which  have  passed  since  the  beginning 
of  the  calendar  year.  Thus,  for  example,  if  a  Self-IVoving  In- 
stalment Ledger  were  to  be  introduced  the  1st  of  April  the  bal- 
ances from  the  old  ledger  would  be  brought  forward  into  the  bal- 
ance column  of  the  April  account,  filling  out  opposite  the  names 
on  the  first  folio  the  reference  to  the  old  ledger  as  there  provided. 
The  accounts  would  then  be  regularrv-  conducted  to  the  end  of  the 
year  and  then  carried  forward  into  a  new  ledger  in  case  it  were 
desired  in  the  following  year  to  have  the  books  corresi)ond  with 
the  calendar  year.  On  the  other  hand,  if  it  were  desired  to  main- 
tain a  fiscal  year  running  from  April  I  to  March  31  the  balance 
from  the  December  accoimt  might  be  brought  forward  in  the  same 
ledger  to  the  January  space  previously  left  unused,  and  in  this 
way  January  to  March  inclusive  would  be  used,  thus  employing 
every  page  of  the  ledger.  For  the  succeeding  year  a  ledger  would 
of  course  be  ordered  ruled  for  the  fiscal  year  designated.  These 
expedients  are  mentioned  only  because  through  correspondence 
we  have  learned  that  questions  of  this  sort  arise  in  the  minds  of 
those  who  are  considering  the  advisability  of  a  change. 


ajijfei  i;L±A*^*-"»?''M#^^ 


r  witli  the 
is  begun, 
beginning 
roving  In- 
ril  the  bal- 
ito  the  bal- 
the  names 
e  provided. 
■  end  of  the 
ase  it  were 
>pond  with 
;d  to  niain- 
:he  balance 
in  the  same 
and  in  this 
employing 
dger  would 
ed.  These 
espondence 
le  minds  of 


SMALL  AND  LARGE  STORES 
The  bookkeeping  and  business  system  described  in  this  vol- 
ume is  equally  applicable  to  small  and  large  -f  >-';--.;; ." 
the  use  of  such  terms  as  -accounting  department,  pnvate 
office."  ••superintendent;-  "managing  man."  "delivery  depart- 
ment," "collection  department,"  etc..  we  accomplish  a  double  pur- 
pose-namely, indicating  the  divisions  with  which  a  large  enter- 
prise  would  be  organized  and  also  pointing  out  the  functions  the 
Lrchant  must  exercise  who.  in  conducting  a  small  busn.ess,  prac- 
tically  does  everything  himself. 

The  Self-Proving  Accounting  and  Business  System  is  so 
elastic  as  to  be  adapted  to  all  conditions  of  business,  and  the  occa- 
sional presence  in  this  book  of  terms  which  refer  to  large  orgamza- 
tions  should  not  in  the  least  distress  the  man  who  is  conductmg  a 
small  business  nor  cause  him  to  suppose  for  a  moment  that  the 
plan  in  its  essential  features  is  not  as  well  adapted  to  hts  require- 
ments as  to  those  of  much  larger  concerns. 

The  transactions  of  a  business,  or  the  items,  are  just  the  same 
in  kind,  whether  ihe  enterprise  be  of  large  magnitude  or  of  very 
linnited  dimensions.  The  books  and  accounts  to  be  employed  are 
of  the  same  character,  whether  the  business  be  large  or  small  but 
the  subdivisions  required  are  far  less  in  number  with  a  small  busi- 
ness than  with  a  large  business,  because  in  the  latter  case  the  busi- 
ness employs  a  larger  number  of  people.  The  system  explained 
in  this  book  may  be  used  in  a  business  so  small  that  the  propneto 
and  a  clerk  constitute  the  entire  force,  or  it  may  be  equally  well 


184 


THE    SELF-PROVING 


employed,  with  proper  expansion  in  the  several  departments,  in  a 
business  the  sales  of  which  are  as  much  as  $75,000  to  $200,000  a 

month. 

The  Self-Proving  Accounting  and  Business  System  has  noth- 
ing of  the  mysterious  about  it.     It  is  simply  common  sense  prac- 
tice arranged  on  scientific  principles  and  adapted  to  the  ends  in 
view.     It  does  away  with  all  of  the  secrecy  and  mystery  that  have 
heretofore  surrounded  the  science  of  good  bookkeeping  and  pre- 
sents both  details  and  results  in  such  a  form  as  to  enable  any  mer- 
chant, irrespective  of  his  general  education  or  experience  as  to 
bookkeeping,  to  be  in  touch  with  all  that  is  going  on  and  to  be 
able  to  judge  of  all  the  transactions  of  the  business  from  whatever 
point  he  may  choc.e  to  view  them.     Instead  of  the  bookkeeper  of 
the  establishment  keeping  within  his  own  control  the  condition  of 
the  business  and  divulging  only  so  much  of  it  to  the  proprietor  as 
to  him  seems  best,  the  proprietor,  by  the  Self-Proving  Accounting 
System,  has  everything  brought  to  him,  and  therefore  becomes,  as 
he  should  be,  the  prime  mover  in  the  enterprise,  the  centre  around 
which  all  the  departments  revolve  and  from  whom  they  receive 
their  force  and  impetus.     These  features  of  the  system  are  greatly 
appreciated  by  those  who  have  adopted  the  plan  and  will  be  in- 
stantly perceived  by  all  who  investigate  it. 


■  ■   ",  -  J  ■■ 


ments,  in  a 
$200,000  a 


n  has  noth- 
sense  prac- 
the  ends  in 
y  that  have 
ig  and  pre- 
ile  any  mer- 
ience  as  to 
1  and  to  be 
m  whatever 
okkeeper  of 
:ondition  of 
roprietor  as 
Accounting 
becomes,  as 
ntre  around 
:hey  receive 
1  are  greatly 
i  will  be  in- 


APPLICATICN   FOR   CREDIT 

Every  applicant  for  credit,  or  every  purchaser  who  desires  to 
buy  goods  to  be  paid  for  upon  the  instalment  plan,  should  be 
required  to  give  various  particulars  concerning  himself,  mcludmg 
name  and  address  and  whether  or  not  the  proposed  purchase  .s 
the  first  transaction  with  the  house.     He  should  also  give  his  oc- 
cupation, and  tell  where  employed,  with  such  personal  references 
as  he  may  be  willing  to  supply.     Information  of  this  kmd,  when- 
,  ever  given,  should  be  preserved  in  the  office,  because  occasionally 
it  is  very  desirable  indeed  to  be  able  to  refer  to  it.     Transactions 
with  customers  are  greatly  facilitated  by  the  use  of  a  blank  sim- 
ilar to  that  presented  on  the  opposite  page. 

In  addition  to  the  information  which  the  customer  gives  con- 
cerning himself,  there  should  be  looked  up  his  past  record  in  case 
he  has  previously  dealt  with  the  house.     Accordingly,  the  lower 
part  of  the  form  is  devoted  to  a  record  of  previous  transactions 
The  bookkeeper  puts  upon  the  form  a  record  of  the  number  of 
purchases  that  have  been  made,  with  the  total  amount,  and  indi- 
cates how  the  payments  have  averaged.     He  also  states  the  bal- 
ance of  the  present  account,  if  any.    The  salesman  also  contrib- 
utes his  quota  to  the  completion  of  the  document  by  inserting  the 
estimated  amount  of  the  proposed  purchase,  together  with  a 
memorandum  of  the  terms  that  the  customer  desires  to  make. 
In  filling  the  blank  up  to  this  point  the  office  employes  have  been 
investigating  the  proposed  credit  so  thoroughly  that  each  of  them 
has  formed  an  opinion,  either  that  it  is  expedient  or  that  it  is  in- 


1! 

V 


w 


I 


mmm^m^^ 


im 


THE    SELF-PROVING 


APPLICATION  JORCREDII 


Ledger  Jfo- 


J{ame.. 


Address.. 


Is  this  the  first  transaction  1 

Former  Address 

Occupation 


Where  Employed 


Reference  and  other  Information 


RFrnRH  DF  PREVIOUS  TRINSICTION 


How  many  purchases... 
Total  amount  of  same 
Average  of  Payments... 


Balance  of  Present  Account 

Estimated  amount  of  this  Purchase. 

Terms  Proposed 

Offioe  Recommendation 

Manager's  Approval: 


Form  of  Credit  Application. 


•immimmitmmm 


ACCOUNTING    SYSTEM 


181 


expedient  to  grant  it;  and,  therefore,  the  office  is  prepared  to 
make  a  recommendation  in  the  case.     A  line  is  provided  for  this 

purpose. 

When  all  the  spaces  have  been  filled  out  in  this  manner  the 
application  goes  to  the  general  manager  or  proprietor  for  final 
approval  or  disapproval,  as  the  case  may  be,  and  his  decision  m 
the  case  is  indicated  over  his  initials  at  the  bottom  of  the  form. 
In  a  very  large  business  there  might  be  employed  a  credit  man- 
ager, whose  duty  it  would  be  to  pass  upon  applications  for  credits. 
In  no  case  should  sales  be  made  or  goods  allowed  to  go  out  of  the 
store  until  some  one  with  proper  authority  has  O.  K.'d  the  ap- 
plication for  credit. 

As  before  remarked,  all  credit  appHcations  should  be  filed  in 
a  way  to  make  them  accessible  at  any  future  time.  The  forms 
may  be  filed  in  any  of  several  acceptable  ways.  The  most  satis- 
factory, perhaps,  all  things  considered,  is  by  some  means  of  alpha- 
betical arrangemer.t.  There  is  a  space  provided  in  the  form  sub- 
mitted herewith  for  recording  the  ledger  number  after  the  account 
is  entered  up,  a  detail  that  should  not  be  omitted. 


SALES,    SHEETS   OR   ORDER   FORMS 

The  sales  sheets,  order  forms  or  invoices,  by  whichever  name 
they  may  be  designated,  that  are  used  with  the  Self-Proving  Ac- 
counting System  are  the  same  in  shape  and  character  as  have  long 
been  employed  for  salesmen's  orders  in  jobbing  and  other  mer- 
cantile establishments.  They  are  printed  upon  paper  of  good 
quality  and  of  a  weight  to  permit  duplication  by  the  use  of  carbon 
sheets. 

For  ordinary  retail  stores,  in  which  some  of  the  sales  are  upon 
the  lease  or  contract  plan,  and  others  upon  open  account,  two 
forms  are  desirable.  One  of  these  would  be  used  for  cash  sales  or 
for  sales  to  customers  upon  open  account — that  is,  outright  sales, 
without  the  lease  or  contract  provision — and  the  other  for  lease 
or  contract  sales,  with  payments  upon  the  instalment  plan.  The 
difiference  in  the  ruling  and  printing  of  these  two  forms  is  very 
slight.  In  each  case  they  are  arranged  in  sets  of  three  and  put 
up  in  pads.  One  copy  is  intended  for  the  customer,  being  the 
bill,  or  invoice.  Another  is  the  office  copy,  and  is  filed  in  a  post 
binder,  as  described  in  another  part  of  this  book.  The  third  is 
the  requisition  on  the  shipper,  and  contains  all  necessary  direc- 
tions to  the  shipper  for  the  delivery  of  the  goods.  The  third 
copy,  or  the  one  intended  for  the  shipper,  is  preferably  printed  on 
paper' of  a  different  color  from  the  other  two,  for  the  purpose  of 
readily  distinguishing  it  among  the  documents  of  a  similar  form 
in  the  office. 

In  the  use  of  either  form  by  the  salesman  an  order  number  is 


.  .i^':ii'  p'^m''™f'*''^^- 


RMS 


hichever  name 
if-Proving  Ac- 
:r  as  have  long 
nd  other  mer- 
)aper  of  good 
;  use  of  carbon 

sales  are  upon 

account,  two 
)r  cash  sales  or 
outright  sales, 
other  for  lease 
;nt  plan.  The 
»  forms  is  very 

three  and  put 
ner,  being  the 
1  filed  in  a  post 
The  third  is 
ecessary  direc- 
ds.  The  third 
ably  printed  on 
the  purpose  of 

a  similar  form 

)rder  number  is 


ACCOUNTING    SYSTEM 


m 


applied  to  the  blank  when  being  lulled  out  in  the  way  described  m 
another  part  of  this  book  where  the  Number  Record  and  sales 
numbers  are  discussed.  The  number  is  written  upon  the  ongmal, 
during  the  time  the  dupUcates  and  their  carbon  sheets  are  m  place, 
so  that  the  number  also  appears  upon  each  of  the  several  copies, 
thus  unmistakably  identifying  them.  ^  ». 

The  printing  at  the  top  of  the  form  of  sales  sheet  used  for 
cash  sales,  or  for  sales  to  be  charged  in  ordinary  account,  is  in  the 
general  style  of  a  bill  or  invoice.     In  the  form  used  for  instalment 
Lse  or  contract  sales  the  printing  on  the  face  of  the  sheet  differs 
from  the  ordinary  bill  or  invoice,  because  the  sale  indicated  is 
made  with  restrictions  and  is  limited  by  the  terms  of  the  contrac 
which  has  been  signed  by  the  purchaser.    There  is,  therefore,  at 
the  top  of  the  second  form  meiely  the  word  "Order,"  below  which 
is  space  for  the  name  of  the  contract  purchaser  and  his  place  of 

residence.  , 

On  the  back  of  the  form  used  for  lease  or  contract  sales  there 
is  printed,  for  convenience,  the  lease  or  agreement  under  which 
the  goods  are  sold,  with  blank  spaces  for  writing  in  such  det^ls  as 
are  special  to  the  transaction.  At  the  bottom,  lines  are  left  for 
.he  signature  of  the  purchaser,  with  notation  of  his  references  and 
various  other  particulars  pertinent  to  the  transaction. 

Of  the  form  of  sales  sheets  used  for  cash  sales  or  for  sales  m 
ordinary  account,  the  first  or  original  of  the  three  sheets  in  the  set 
is  given  to  the  customer  as  his  invoice  or  bill.    With  the  second 
or  lease  form,  the  first  or  original  of  the  three  sheets  in  the  set  is 
retained  in  the  office,  while  the  second,  or  the  first  carbon  copy,  is 
,iven  to  the  customer  as  his  copy  of  the  record  of  the  t-nsacUon^ 
The  lease  or  contract,  which  is  printed  on  the  back  of  the 
original,  receives  the  customer's  signature.     In  due  course  this 
original  is  filed  away  in  a  locked  post  binder,  and  th-^^^-  -^^ 
a  page  in  what  may  be  designated  as  the  contract  book  of  the  es- 


.'^ 


r 


t. 


190 


THE    SELF-PROVIXO 


tablishment,  easy  to  be  referred  to  by  reason  of  the  number  which 
it  carries,  and  possible  of  detachment  in  case  it  is  wanted  in  legal 
proceedings  or  for  any  other  cause.  The  second  of  this  set,  or  the 
first  carbon  copy,  which,  as  already  mentioned,  is  handed  to  the 
customer,  has  on  the  back  of  it  the  form  of  lease  or  contract  which 
the  customer  has  signed.  By  delivering  this  sheet  to  the  cus- 
tomer he  is  furnished  with  a  list  of  the  goods  purchased,  including 
the  prices  of  the  same,  and  also  a  copy  of  the  lease  or  contract 
which  he  has  signed.  This  method  of  dealing  with  the  customer 
is  very  generally  appreciated,  and  in  the  long  run  is  found  to  be 
not  only  expedient,  but  economical,  for  it  saves  making  out  from 
time  to  time,  when  customers  demand,  a  list  of  the  goods  origi- 
nally purchased,  together  with  prices.  This  duplicate  of  the  con- 
tract and  bill  of  the  goods  charged,  taken  in  connection  with  the 
pay  card,  elsewhere  described  in  this  volume,  form  a  combination 
which  customers  learn  to  appreciate,  and  which  in  itself  is  busi- 
nesslike and  up  to  date,  as  compared  with  transactions  in  other 
lines. 

For  convenience  in  use,  and  in  the  sense  of  saving  time  when 
customers  are  in  hand,  it  is  expedient  to  keep  a  number  of  sets  of 
these  sales  forms  of  both  kinds,  ready  in  holders,  as  elsewhere  de- 
scribed in  this  book,  with  the  carbon  sheets  in  place.  When  a  cus- 
tomer enters  the  store  to  purchase,  the  salesman  gives  attention  to 
his  wants,  and,  in  his  pocket  note  book,  or  in  any  other  form  that 
he  may  prefer  or  that  may  be  directed  by  the  management  of  the 
establishment,  makes  a  memorandum  of  the  goods  he  desires  to 
purchase.  It  is  expedient  to  make  a  preliminary  li  t  in  this  way, 
because  customers  frequently  change  their  minds,  and,  after  hav- 
ing allowed  the  salesman  to  put  down  one  article,  request  that  it 
be  changed  and  something  else  substituted.  It  very  frequently 
occurs  in  establishments  doing  a  mixed  business — that  is,  making 
some  sales  for  cash,  others  on  open  account,  and  still  others  on  the 


mimmti^mnm>^ 


imber  which 
ited  in  legal 
is  set,  or  the 
nded  to  the 
itract  which 
to  the  cus- 
d,  including 
or  contract 
le  customer 
found  to  be 
ng  out  from 
joods  origi- 
;  of  the  con- 
on  with  the 
:ombination 
:self  is  busi- 
ms  in  other 

I  time  when 
er  of  sets  of 
Isewherc  de- 
When  a  cus- 
attention  to 
;r  form  that 
ment  of  the 
le  desires  to 
in  this  way, 
d,  after  hav- 
juest  that  it 
y  frequently 
t  is,  making 
thers  on  the 


ACCOUNTING    SYSTEM 


m 


lease  or  contract  credit  plan-that  it  is  a  matter,  determined  only 
after  showing  a  customer  through  the  entire  stock  of  the  estab- 
lishment, that  the  salesman  learns  upon  which  of  the  several  plans 
the  purchase  is  to  be  made.    These  reasons  and  others  combmed 
make  it  inexpedient  to  use  the  order  blank  with  carbon  sheets,  as 
above  described,  until  the  list  of  goods  has  been  completed.    When 
prices  have  been  agreed  upon  and  the  order  has  been  made  com- 
plete the  salesman  writes  out  the  bill  in  detail  on  whichever  form 
is  appropriate,  thus  completing  the  transaction,  supplying  the  cus- 
tomer with  his  copy,  furnishing  the  office  with  its  record  and  pro- 
viding the  shipping  department  with  necessary  directions  for  de- 
livering the  goods. 

Referring  to  the  blanks  which  are  shown  in  miniature  fac- 
simile on  these  pages,  it  will  be  seen  that  space  is  provided  for  the 
name  of  the  salesman,  also  for  the  O.  K.-ing  of  the  credit  of  the 
customer.  It  is  expedient  that  the  salesman's  name  be  added  to 
all  the  invoices  which  pass  through  his  hands,  for  the  convenience 
of  reference  where  questions  are  asked.  The  rule  should  be  estab- 
lished that  no  sale  shall  go  through  to  be  charged  on  the  books 
except  it  has  the  approval  of  the  proprietor  or  credit  manager. 

By  comparing  the  dififerent  forms  shown  in  fac-simile  here- 
with it  will  be  noticed  that  in  each  set  the  one  which  is  to  be  re- 
tained in  the  office  is  wider  than  the  others  of  its  set,  and  that  m 
its  extra  width  it  is  provided  with  an  additional  price  and  amount 
column.     This  is  for  the  extension  of  cost  prices— "Tsoc,"  as  it  is 
called  on  the  Sales  Record  and  in  some  other  books  of  the  Self- 
Proving  Accounting  System.     Every  bill  that  is  made  out  is  thus 
figured  in  duplicate,  first  for  the  selling  price  and  second  for  the 
cost  price.     These  figures,  as  elsewhere  explained,  form  the 
foundation  of  the  cross  entry  between  Selling  Account  and  Buy- 
ing Account.     The  extra  width  on  the  office  copy,  after  the  costs 
have  been  figured  in  this  manner,  may  be  detached,  having  first 


Itt 


THE    SELF-PKOVINQ 


been  permanently  identified  with  the  sale  to  which  it  belongs  by 
the  sales  number  written  in  the  blank  space  at  the  top.  This  plan 
is  of  the  nature  of  a  precaution  against  spying  and  inquisitive  eyes. 


r 


i 


t  belongs  by 
).  This  plan 
uisitive  eyes. 


■I  J  Al 


ACCOUNTING    SYSTEM 


103 


ORIGINAL  OF  ORDER  FORM  FOR  INSTALMENT  OR   LEASE  SALES.     (EXAMINE 

Successive  Pages.) 


J.  F.  BROWN  &  CO.  J 
ar^  Boasc  jiinilsltcrs 


original  of  Sales  Sheet  for  Cash  or  Open  Account  Sales- 
CUSTOMER'S  Invoice.  (Examine  Successive  Pages.) 


^iimMi^aliMiniiltir'-'"'!'-'''  -'■'"   "'  ""  '•"" 


■MMMKHMMBi^'-' 


nf" 


!> 


Back  of  Cash  Customer's  Invoice 


ACCOUNTING    SYSTEM 


tM 


FIRST  CARBON  COPY  OF  ORDER  FORM  FOR   LEASE  SALE-CUSTOMEH'S  INVOICE. 


'M 


FIRST  CARBON  COPY  OF  SALE  SHEET  FOR  CASH  SaLE-FILED  IN  OFFICE. 


j?ff-|tri  'iVinnm 


100 


THE  SELF  rnoviNG 


\ 


^■:ife 


4.  r.  anowN  4  ca 


Back  of  First  Carbon  Copy  of  Order  Form  for  Lease  Sale-Customer's  Copy 

OF  Agreement. 


Back  of  First  Carbon  Copy  of  Sales  Sheet  for  Cash  Sale.      \ 


^    ■■■ 


mmmmmltm^ 


Mtpi—'i  ■■  !■'■    ■-^f- 


ACCOUNTING    8YHTEM 


107 


J  f  wmmn  a  co 


IT*I 


I      %»mmt»     7 


TOMER'S  Copy 


1 


Second  Carbon  Copy  of 


ORDER  form  for   LEASE  SALE-REQUISITION  ON  SHIPPING 
DEPARTMENT. 


J.  F.  BROWN  &  CO. 


Sale. 


SECOND  CARBON  COPY  OF  SALES  SHE.T-^^CASH  SALE-REQU,S,nON   ON  SH,PP,N0 


'mS^Siim^Sis> 


,.»^ 


LEASES,      SALES. 


t 
f 


CONTRACTS 
MORTGAGES 


AND      CHATTEL 


•II, 


Long  experience  in  the  instalment  and  credit  business  has 
demonstrated  that  it  is  advisable  in  all  cases  where  goods  are  sold 
on  time  that  there  should  be  the  security  of  a  lien  or  mortgage  on 
the  goods.     This  is  desirable,  «irst,  in  the  interest  of  the  merchant 
as  against  his  debtor,  and  again,  in  the  intercut  of  the  merchant  as 
against  other  creditors  of  the  debtor.     With  a  clearly  established 
lien  on  the  goods,  they  are  not  the  customer's  property,  but  in- 
stead remain  the  property  of  the  merchant  until  fully  paid  for, 
while,  on  the  other  hand,  without  a  lien,  however  honest  the 
debtor  or  customer  may  be,  they  are  in  jeopardy  in  case  he  be- 
comes involved  in  his  affairs,  or  in  case  an  action  is  commenced 
against  him  for  any  good  reason.     The  goods  under  these  cir- 
cumstances are  liable  to  be  seized  under  execution,  and  where  this 
occurs  the  merchant's  security  is,  of  course,  wiped  out. 

In  such  cases  it  is  not  unusual  for  the  customer  to  say  in 
reply  to  requests  for  continued  payments  on  the  purchases: — 
"The  s-oods  were  sold  under  execution  when  I  got  into  trouble 
with  Blank  &  Co.  Now  that  they  are  gone,  of  course  I  cannot 
undertake  to  pay  for  them,  for  I  have  not  got  the  goods."  Under 
thf  3e  circumstances  there  is  nothing  left  for  the  merchant  to  do 
but  to  sue  the  customer  as  an  ordinary  debtor.  Every  business 
man  knows  that  the  chances  for  collecting  under  such  conditions 
are  very  poor.  On  the  other  hand,  by  making  sales  only  upon 
the  lien  or  mortgage  basis,  the  merchant  always  has  the  security 


ACCOUNTING    SYSTEM 


190 


:hattel 

usincss  has 
Dels  are  sold 
lortgage  on 
le  merchant 
nerchant  as 
established 
■rty,  but  in- 
lly  paid  for, 
honest  the 
case  he  be- 
commenced 
;r  these  cir- 
d  where  this 
t. 

er  to  say  in 
purchases: — 
into  trouble 
rse  I  cannot 
ids."  Under 
reliant  to  do 
/ery  business 
:h  conditions 
es  only  upon 
J  the  security 


of  the  goods  themselves,  or,  at  least,  for  so  long  a  time  as  they  are 

in  sight  or  can  be  located. 

The  exact  terras  upon  which  conditional  sales  are  made  de- 
pend largely  upon  the  laws  peculiar  to  the  State  i^n  wh.ch  the 
tansactions  occur.    The  wording  of  the  contract  wh.ch  the  cus- 
tomer signs  at  the  time  the  purchase  is  made  depends  m  some 
degree  upon  the  plan  upon  which  it  is  intended  to  operate  so  far 
as  affects  the  ultimate  rights  of  the  merchant  m  ■:  •  .e  of  fa.hre   o 
pay     Whatever  may  be  the  underlying  plan,  the  wordmg  should 
be  precise,  unequivocal,  and  so  strong  as  to  give  the  merchan 
every  possible  protection  in  handling  a  dishonest  customer,  and 
leaving  to  his  discretion  whatever  leniency  it  is  desired  to  show  to 
honest  but  unfortunate  people. 

Under  the  same  State  laws  different  merchants  w.ll  elect 
different  forms  of  leases  or  contracts.    In  some  cases  the  prefer- 
ence is  so  marked  that  they  refer  in  their  adverttsemen^s    o  the 
character  of  the  agreements  which  they  enter  into  w,th  cus- 
tomers, or  bring  the  terms  of  the  agreement  forvvard  as  speaa 
reasons  why  customers  should  prefer  to  deal  w,th  the,n^     I 
inexpedient  for  any  merchant  to  proceed  in  matters  of  th,s  kn^ 
without  competent  counsel.     A  good  lawyer  should  be  con  ul    d 
with  respect  to  the  form  of  lease  or  contract  to  be  used.    In  the 
merchant's  interest  he  should  carefully  consider  the  case,  m  view 
of  all  the  provisions  of  the  laws  of  the  State  in  which  the  transac- 

tions  are  to  occur.  . 

Several  forms  of  contracts  and  leases  are  presented  herewith, 
which  are  to  be  regarded  merely  as  suggestions.  They  are  of^ 
fered  with  the  injunction  that  none  of  them  is  to  be  employed 
until  it  has  been  revised  by  a  competent  lawyer  in  the  hght  of  the 
law  as  it  exists  at  the  time  in  the  State  in  which  it  is  to  be  used. 
Attention  should  here  be  called  to  the  fact  that  laws  relating  to 
such  matters  vary  from  time  to  time,  and  that  occasionally  de- 


i,Jt»ai&^i^MtyMtto 


fifir 


200 


THE    SELF-PROVING 


cisions  of  the  courts  are  rendered  which  have  important  bearings 
upon  matters  of  this  kind.  It  is  to  the  interest  of  the  merchint, 
therefore,  to  be  in  touch  with  his  lawyer  on  points  of  this  sort  at 
all  times,  not  only  at  the  beginning  of  the  business,  but  regularly 
thereafter. 

The  following  is  one  of  the  simplest  instruments  of  the  kind 
that  we  have  ever  encountered,  and  is  presented  as  being  typical 
of  what  is  used  in  several  lines  of  trade  in  New  York  and  vicinity, 
wherein  in  many  cases  the  value  of  the  goods  covered  by  such  a 
receipt  runs  to  very  large  figures: — 


6    1 


A  "borrowing"  form 

This  certifies  that has  borrowed  and 

received  of the  articles  noted  on  the  other  side 

of  this  form  upon  the  following  understanding:— If  the  price  set  against  thenl 
Is  paid  in  instalments  at  the  times  specified,  then  the  articles  are  to  become  the 
property  of  the  said  borrower;  otherwise  the  articles  remain  the  property  of  thd 

said In  the  meantime  the  borrower  hereby 

agrees  to  keep  the  property  in  good  order,  and  to  pay  the  price,  as  per  memo* 
"randum  above  referred  to,  and  at  the  times  set  forth.  And  the  said  borrower 
may  use  the  property  free  from  any  other  charge.    The  said  property  is  not  to 

be  removed  from without  the  written  consent  of 

the  said If  the  said  borrower  fails  to  meet 

any  of  the  payments  at  the  time  specified,  or  to  keep  the  property  in  good 

order,  then  the  said may  take  the  said  property 

and  dispose  of  it  to  the  best  advantage,  rendering  to  the  said  borrower  all  sur- 
plus, if  any,  after  paying  the  price  agreed  upon  and  the  expenses  of  removal 
and  sale. 

(Sign  here) 

Signed  in  presence  of 


•«ii'i-j.^ai!.,jiL.J_4.,_,.J.A ' '. .  Ji_ 


tant  bearings 
he  merchint, 
►f  this  sort  at 
but  regularly 


ACCOUNTING    SYSTEM 


201 


The  following  form  is  used  by  a  prominent  firm  of  Toronto. 
Canada,  dealing  in  household  goods  upon  the  instalment  plan:- 


s  of  the  kind 

being  typical 

and  vicinity, 

ed  by  such  a 


s  borrowed  and 
a  the  other  side 
et  against  then) 
•e  to  l>ecome  the 
!  property  of  thd 
)orrower  hereby 
e,  as  per  memo* 
e  said  borrower 
•operty  is  not  to 
itten  consent  of 
ir  fails  to  meet 
roperty  in  good 
lie  said  property 
•orrower  all  sur- 
ases  of  removal 


A   CONTRACT    FORM 

This  certifies  that  I  have  received  this  day  of^ . . ....  ••  ■  •  -^  -  ■--  •  •  •  -- 

.goods  as  per  invoice  or  order  on  the  other  side,  H-^^'J,^,,,,,,  ,^ 
«!""'"•«'  ««  f ol^'^;-* ;„;;% rom  the  date  hereof.    It 

i,e;;p^^yag;;ed;SC^uetoV.dgoo^^^ 

included  in  contracts  which  niay  herea   «r  be  "^"^^  •^^^^^^^n.^s  is  fully  paid 

tracts  shall  have  been  fully  complied  with. 

in  cas.  of  failure  to  maUe  any  of  -'^  P^^^-^^;  ^^^^^^^^^ 
wm  surrender  said  goods  to  said  firm,  or  I  «  «g«"t  ^^'^^^'^^^^  ^^  ^,r„ey 
of  law.    in  case  I  fail  to  deliver  said  ^°°^!.^"  ^"^^jf,"' ^^e^^^^^    hereby  grant 
at  any  time  upon  demand  after  any  hrejch  of  tt^^^^^  agie^m     ^  ^^^^^^^^ 

to  said  firm,  or  its  agent  or  attorney,  ^f  J^^^^^f^'J.XTthem  liable  for  an? 

and  expense  in  connection  with  this  transaction  with  me. 

„c^  thnt  If  said  firm  takes  possession  of  said  goods  for  any 

company. 

,,ltbout  written  notice  to  .aid  «™  »f  J^^"^"  „  „„a™,a„amg,  ve,l»l  or 
•^^Z-^,  S;;r  ::^ir.U' lla'TnTo-'l,  o,  «,  ....  ..  ...e-oen. 

Other  than  is  here  expressed. 

^e  a..  l.«..n.en.  ««»  -  ^-'rLri.^J.'nn"  S  "S^" 

within 

payment  during  each  succeeding 

,n  „e  even,  o,  -- '» -^'.^f  ^.r^Jn"  Sir»:  Z 
behalf  to  claim  any  of  said  goods  as  exempt  oy  »»«  nv 


L>., 


^as.gi-i'HAi 


IT' 


202 


THE    SELF-PROVING 


vised  Statutes  of Chapter and  all  its  amending 

acts  shall  in  no  way  apply  to  affect  this  contract. 

Signed  this day  of 189.. 

(Sign  here) 

In  presence  of 


Husband's  occupation. 

Where  employed 

References 


The  following  form  also  had  its  origin  in  the  Dominion  of 
Canada,  and  resembles  the  one  last  presented  in  all  essential  par- 
ticulars, but  is  fuller  in  various  details: — 


ANOTHER   CONTRACT   FORM 

This  certifies  that  I  have  purchased  from 

goods  as  per  invoice  on  the  other  side,  and  attached  hereto,  on  the  terms  and 

for  which  I  agree  to  pay  $ as  follows:—? cash 

down and  balance  in 

payments  of  ? each,  from  the  date  hereof. 

It  is  expressly  agreed  that  the  property  in  and  title  to  said  goods  and  to  all 
other  goods  which  are  included  in  and  the  subject  of  contracts  which  have  been 

heretofore  made,  or  may  hereafter  be  made  by  me,  with  the  said 

shall  not  pass  from  the  said 

until  the  said  sum  of  $ is  fully  paid,  and  all  the  dues,  terms  and 

conditions  of  this  and  said  other  contracts  shall  have  been  fully  complied  withi 

The  said may  pay  any  rent  and  taxes  due 

on  premises  wliere  said  goods  may  be,  and  such  sums  shall  be  forthwith  pay- 
able by  me  to  them.  On  default  in  any  of  the  above  payments  or  if  goods  shall 
be  seized  for  rent  or  taxes,  or  if  tlie  rent  of  premises  where  goods  are  shall  be! 
[overdue,  or  if  I  shall  abandon,  dispose  or  attempt  to  dispose  of  the  same  or 

remove  them  from  No street,  without  permission,  the  whole 

sum  agreed  to  be  paid  shall  immediately  become  due  and  payable,  and  my 
right  to  possession  of  said  goods  shall  cease,  and  all  payments  shall  be  forfeited 
to  the  said as  reasonable  compensation  for  in- 
Jury  to  and  use  of  said  goods  and  expense  and  trouble  in  regard  to  same,  and 
the  said or  his  agents  may,  without  legal  proc- 
ess, enter  upon  any  premises  and  take  possession  and  remove  said  goods  at  any 
time  during  the  day  or  night,  without  being  llaWe  for  any  manner  of  trespass. 


rill 
I'll 


^^jiiittMiiTiiimri  imvfiiM 


,«fc.'  ifciiu»iriwiiiijfl'iniiniiiin 


I 

Ite  amending  ■ 


Dominion  of 
:ssential  par- 


the  terms  and 

cash 

and  balance  In 
he  date  hereof, 
foods  and  to  all 
rhlch  have  been 
1 

lues,  teruiB  and 
complied  with; 
and  taxes  due 
forthwith  pay- 
)r  if  goods  shall 
ods  are  shall  bd 
of  the  same  or 
8ion,  the  whole 
ayable,  and  my 
hall  be  forfeited 
ensatlon  for  in- 
rd  to  same,  and 
hout  legal  proc- 
lid  goods  at  any 
mer  of  tri>8pass. 


ACCOUNTING    SYSTEM 


203 


A«d  .t  .be option  «P«n ."cb .eUure ..  ''■;«''>;-;•;-;■  ;;,„•  --,._ '.^d  «,« 

onifl  nfter  civinc  credit  for  proceeds  of  sale;  or  the  saia •  •  • • 

mlvMvlSiigrds  valued  and  retain  same,  and  may  then  forthwith  recover 
TomTe  ba  ance  of  said  amount  agreed  to  be  paid,  together  with  expenses  of 
s    "^and  "luation.  after  giving  credit  with  amount  of  said  valuation. 


Should  the  said. 


take  possession  of  said  gooda 

1  shall  have  right  to  red'eem  same"  ai'any' time  within  twenty  days  tbereafter 
iTuponpa^^g. 11  balance  Of  ..;.t^^^ 

Incurred  by  reason  of  taking  possession  aforesaid. 

In  the  event  of  seizure  for  rent  I  hereby  authorize  the  said J  V  "  Z  ' ' 

In  the  event  or  ^  u,y  behalf  to  claim  any  of  said  goods  ab  exempt  by  law 

fi^m'  distress' "  Revised  Statutes Chapter and  al 

arndlng  aSs  shall  in  no  way  apply  to  or  affect  this  contract.  Any  promissm-y 
notes  or  other  securities  given  by  me  at  any  time  shall  be  collateral  only  hereto, 
i  preedTngl  may  be'taken  thereon  without  In  any  way  affecting  or  preju- 
dicing  this  agreement. 

And  It  is  hereby  agreed  that,  having  purchased  other  goods  under  con- 
tracts from  the  said •••••• -theeald ' -j^-j^"  ^^^j^; 

. . .  .agree*  that  so  long  as  I  shall  pay  $ to  umi  tnaa 

I  shal'l'not  be  required  to  pay  more,  but  In  default  In  any  of  said  payments  all 
Ltnems  piovlded  for  by  said  contracts  shall  Immediately  become  due  and 
S're     111  payments  made  by  me  on  this  or  any  other  -tract  may^  be 

TonCcVn^sr'irjreruti^^^^^^^^ 

mine  to  tScontrary  notwithstanding.  Nothing  herein  shall  affect  the  provi- 
sions of  any  of  said  contracts,  save  as  to  the  payments  aforesaid. 


Signed  this day  of. 


189.. 


(Sign  here) . 


In  presence  of 


Husband's  occupation. 

Where  employed 

References 


'^i 


I'  y  ■■■''?.■'«•  4.  Ad  Jii.i--4-ia<i^=.-.J 


.)>-^4^it2M^jik'.i^-  HBii-iiiniiiii 


2M 


THE    SELF-PROVING 


Some  of  the  large  furniture  instalment  dealers  in  the  neigh- 
borhood of  New  York  prefer  the  chattel  mortgage  form  to  the 
lease  or  contract  method.  The  form  of  chattel  mortgage  in  use 
by  one  of  these  concerns  is  given  below: — 


A    CHATTEL    MORTGAGE    FORM 

To  all  to  whom  these  presents  shall  come:— 

Know  ye  that  I ••;•  '  °' *^!  *=**L°'- 


county  of .and  State  of  New  York,  party  of 

the 'first  "part,  for  securing  the  payment  of  the  money  hereinafter  mentioned, 

and  In  consideration  of  the  sum  of  one  dollar  to  me  duly  paid  by 

of  the  same  place,  party  of  the  second  part,  at  or  before  the 

ensealing  and  delivery  of  these  presents,  the  receipt  whereof  Is  hereby  acknowl- 
edged, have  bargained  and  sold,  and  by  these  presents  do  grant,  bargain  and 
fsell  unto  the  said  party  of  the  second  part  all  the  household  furniture  and 
housekeeping  effects,  and  all  other  goods,  chattels  and  property  mentioned  andl 
described  in  the  schedule  hereunto  annexed,  In  th^^  house  known  as  and  by  thfl 

street  number 

To  have  and  to  hold,  all  and  singular,  the  goodu  and  chattels  above  bar- 
gained and  sold,  or  intended  so  to  be,  unto  the  said  party  of  the  second  part, 

their  successors  and  assigns  forever.    And  I, ' 

the  said  party  of  the  first  part,  for  myself,  my  hel'  s,  executors  and  adminis- 
trators, all  and  singular  the  said  goods  and  chattels  above  bargained  and  sold 
,unto  the  said  party  of  tlie  second  part,  their  successors  and  assigns,  against 
me,  the  said  party  of  the  first  part,  and  against  all  and  every  person  or  persona 
whosoever,  shall  and  will  warrant  and  forever  defend. 

Upon  condition  that  if  I,  the  said  party  of  the  first  part,  shall  and  do  well 
and  truly  pay  to  the  said  party  of  the  second  part,  his  successors,  or  assigns, 

the  Just  "and  full  sum  of dollars,  payable  as  follows,  vlz.:- 

dollars  now  in  hand,  the  receipt  whereof  Is  hereby  acknowl- 

^g^]  * " dollars  on  delivers'  of  the  above  mentioned  furniture, 

dollars  on  the day  of 18 

and  the  residue,  amounting  to dollars  In  payment  of 

dollars  on  the day  of  each  and  every 

hereafter  until  said  sum  of dollars  is  fully  paid,  which  said  sum 

and  sums  I,  the  said  party  of  the  first  part,  do  hereby  covenant  to  pay. 

Then  this  transfer  to  be  void  and  of  no  effect;  but  in  case  of  Jion-payment 
of  the  said  sums  at  the  time  or  times  above  mentioned,  then  the  said  party 
of  the  second  part  shall  have  full  power  and  authority  to  enter  upon  the 
premises  of  the  said  party  of  the  first  part,  or  any  other  place  or  places  where 
the  goods  and  chattels  aforesaid  may  be,  to  take  possession  of  said  property, 


I  in  the  neigh- 
e  form  to  the 
Drtgage  in  use 


city  of 

(W  York,  party  of 
Dafter  mentioned, 

id  by 

at  or  before  the 
s  hereby  acknowl- 
rant,  bargain  and 
old  furniture  and 
rty  mentioned  andl 
>wn  as  and  by  tha 


battels  above  bar* 
■f  the  second  part, 

t 

itors  and  admlnls- 
largalned  and  sold 
d  assigns,  against 

person  or  persons 

,  shall  and  do  well 
lessors,  or  assigns, 
as  follows,  viz.:— 
3  hereby  acknowl- 
jntloned  furniture. 

18.... 

lyment  of 

^ery 

Id,  which  said  sum 
ant  to  pay. 

ise  of  jion-payment 
hen  the  said  party 
to  enter  upon  the 
ice  or  places  where 
n  of  said  property, 


205 
ACCOUNTING    SYSTEM 

keeping  of  the  said  property),  *«  "PP'^;"  ,f  ?."''  titne  deem  their  lien  upon 
^se  the  said  party  of  ^^^^'^^^^^^'^f^l  them  or  Selr  legal  representative 
Bald  property  unsafe,  it  shall  be  lawful  for  them  o^  ^^  ^^^ 

I  take  possession  of  said  P-P«2;d-„Vt  payment  of  said  debt,  applying  the 
previous  to  the  time  above  ""^"tloned  for  he  pa>  ^^^^  ^^^  ^^p^„g  „, 

proceeds  as  aforesaid,  after  ^;,^"f '"f/"^^^^^^^^^^^    fall  to  satisfy  said  debt 
Lid  property.    If  from  any  ca    e  sa^  J^f^^the  first  part,  do  covenant  and 
interest,  costs  and  charges.  L  tlie«aid  partj         ^^^erstood  and  agreed  to.  by 
■agree  to  pay  the  deficiency,    ^ndjt  is  distinctly  ^^^  ^^  ^^^^^^.^  ^^^^ 

the  parties  hereto,  that  the  said  P^^^  "^J^'™  ^ut  the  written  consent  of 
the  said  goods  and  chattels  from  said  pxem^esw        ^^  ^^^^^  ^^  ^^^  ^^^^^^^^ 

the  said  party  of  the  «econd  Part^  ^^^^rand  continue  in  the  quiet  and  peace- 

rbirpsron :;  z^i^^  ^^^ «-  -  -  -^ '--  ^"^"^™^ " 

"  riess  whereof  I.  the  said  party  of  the  first  part,  -- ^rndlS 

hand  and  seal  the ^'^^  °^ 

hundred  and  ninety 

Sealed  and  delivered  In  presence  of 

(L.S.) 

(L.8.) 


.A.' 


r 


DELIVERY    OF    GOODS 

In  our  description  of  Sales  Sheets  we  have  shown  that  one 
of  the  carbon  copies  passes  to  the  shipping  department  and  be- 
comes in  effect  a  requisition  upon  that  department  for  the  goods 
which  have  been  sold,  and  that  it  carries  upon  its  face  the  direc- 
tions for  their  delivery.  The  shipping  department  is  under  the 
necessity  of  giving  to  the  truckman  or  carter  similar  directions 
concerning  the  goods  which  are  intrusted  to  him  for  deHvery, 
and  is  also  obliged  to  provide  a  form  of  receipt,  to  which  the  de- 
livery man  is  to  get  the  signature  of  the  customer  or  his  repre- 
sentative in  evidence  of  the  proper  delivery  of  the  goods  in- 
trusted to  him. 

The  shipping  department  finds  it  advantageous  to  use  the 
carbon  process  the  same  as  the  office,  and  on  receipt  of  directions 
for  delivery  of  goods  from  the  office  makes  out  a  shipping  ticket 
in  duplicate,  one  copy  of  which  is  to  be  left  with  the  customer 
when  the  goods  are  delivered,  and  one  of  which,  signed  by  the 
customer,  and  also  countersigned  by  the  carter  or  truckman,  is 
returned  to  the  office. 

By  leaving  \  ith  the  customer  a  copy  of  the  shipping  ticket 
there  is  supplied  to  him  the  evidence  of  the  completion  of  the 
transaction,  so  far  as  the  store  is  concerned,  and  he  is  thereby 
afforded  the  opportunity  to  raise  objections  if  anything  is  not  ac- 
cording to  expectations.  The  reason  for  having  the  truckman 
or  carter  sign  the  receipt,  as  well  as  the  customer,  turns  on  a  ques- 
tion of  evidence  in  the  event  of  a  disputed  account.    Very  fre- 


>>fe- 


own  that  one 
ment  and  be- 
for  the  goods 
ace  the  direc- 
;  is  under  the 
ilar  directions 
I  for  deHvery, 
which  the  de- 
or  his  repre- 
;he  goods  in- 
ns to  use  the 
t  of  directions 
hipping  ticket 
the  customer 
signed  by  the 
■  truckman,  is 

hipping  ticket 
pletion  of  the 
he  is  thereby 
liing  is  not  ac- 
the  truckman 
irns  on  a  ques- 
nt.    Very  fre- 


ACCOUNTING    SYSTEM 

quently  the  person  who  bought  the  goods  is  not  present  at  the 
time  of  ddivery,  and  the  receipt,  accordingly,  is  signed  by  the 
wife,  a  son  or  daughter,  a  servant,  or  even  a  friend  of  the  family 
who  happens  to  be  present.     Afterward,    when    any    question 
arises,  the  receipt  may  be  disputed  on  the  groi=nd  that  the  person 
who  signed  it  was  not  authorized  to  do  so.     Q  .lestions  of  this 
kind  are  frequently  raised  so  long  after  the  date  of  the  transac- 
tion that  the  unaided  memory  of  the  truckman  is  not  as  much  as 
the  merchant  would  like  to  have  in  support  of  his  contention. 
Bv  requiring  the  truckman  to  sign  the  receipt  there  is  secured  the 
equivalent  of  a  witness  to  the  signature  or  the  act  of  the  person 
who  receipts  for  the  goods.     In  practice  this  has  been  found  to 
be  a  very  desirable  precaution. 

When  the  truckman  or  carter's  receipt,  or  the  shipping 
ticket  as  we  have  called  it  above,  reaches  the  office,  it  is  checked 
with  the  office  copy  of  the  invoice  or  order,  for  the  purpose  of 
proving  not  only  that  the  goods  called  for  by  the  order  have  been 
delivered,  but  that  all  the  goods  which  have  been  delivered  are 
covered  by  the  order.    The  truckman's  receipt  or  shipping  ticket 
bears  a  serial  number  of  its  own,  and  in  addition  there  is  noted  on 
its  face  the  number  of  the  order  or  invoice  to  which  it  belongs. 
The  first  reason  for  checking  mentioned  above  is  not  of  great  im- 
portance in  itself,  because  if  all  the  goods  ordered  had  not  been 
ddivered   the  customer  would  soon  draw  attention  to  the  fact, 
but  in  addition  it  is  valuable  in  the  sense  of  detecting  careless- 
ness upon  the  part  of  the  delivery  department.    The  second  rea- 
son is  more  important,  for  it  is  always  desirable  to  know  that  no 
goods  have  been  delivered  that  are  not  covered  by  the  invoice  or 
order     Carelessness  in  the  delivery  department  might  cause  the 
delivery  of  articles  from  time  to  time  not  called  for  by  the  orders, 
but  by  the  plan  of  checking  here  suggested  no  such  dehvery 
could  remain  undiscovered  except  by  the  collusion  of  some  one  m 


«r* 


908 


THE    SELF-rROVINO 


the  delivery  department  with  the  truckmen. 

The  merchant  is  always  anxious  to  know  what  security  he 
has  against  a  careless  delivery  of  goods— that  is,  the  delivery  of 
goods  without  proper  charge  to  the  customer— and  also  against 
the  dishonest  delivery  of  goods  by  some  one  whose  intention  it 
is  to  defraud  him.     Irregularities  of  this  kind  are  very  largely 
guarded  agait.st  by  the  fact  that  an  adequate  system  throughout 
the  establishment  is  in  existence  and  is  being  rigidly  enforced. 
Dishonest  men,  as  a  rule,  are  afraid  of  a  system,  for  their  tempera- 
ment seldom  enables  them  to  comprehend  the  system  in  its  com- 
pleteness, and  therefore  they  are  always  afraid  of  encountering 
its  safeguards  in  some  unexpected  direction.     The  system  de- 
scribed in  this  volume,  provided,  as  it  is,  with  numerous  cross  ref- 
erences, and  with  the  diflferent  blanks  and  forms  required  in  its 
use.  manifolded  from  a  single  writing  and  used  for  different  pur- 
poses,  affords  far  more  checks  against  dishonesty  and  fraud  than 
would  be  assumed  on  casual  inspection. 

The  rule  once  established  that  no  sale  shall  be  made,  either 
for  cash  or  to  be  charged,  except  a  sales  number  is  applied  to  the 
order  or  invoice  slip,  and  the  rule  also  established  that  no  goods 
shall  be  delivered  by  the  delivery  department  to  the  truckman,  nor 
by  the  truckman  to  the  customer,  except  also  the  sales  number 
be  present,  and  further,  that  the  delivery  ticket,  which  is  in  dupli- 
cate, shall  also  be  numbered,  leaves  the  dishonest  clerk  far  less 
opportunity  for  successful  efTorts  to  defraud  than  would  be  at  first 
supposed.     The  rigid  enforcement  of  the  regulations  to  which 
we  have  referred  successfully  guards  against  the  delivery  of  goods 
without  charge  in  all  cases  save  only  where  there  is  a  conspiracy 
between  two  or  more  men  in  the  establishment  having  the  ability 
and  opportunity  to  control  the  numbering  and   duplicating. 
Methods  for  guarding  against  this  danger  will  readily  suggest 
themselves  to  every  competent  manager.     They  include,  among 


u- 


1 


at  security  he 
he  delivery  of 
d  also  against 
se  intention  it 
e  very  largely 
m  throughout 
jidly  enforced, 
their  tempera- 
em  in  its  com- 
;  encountering 
he  system  de- 
^rous  cross  ref- 
required  in  its 
r  different  pur- 
and  fraud  than 


ACCOUNTING    SYSTEM 


209 


Others,  such  efforts  as  dally  auditing,  periodical  checking  of  the 
work  .frequent  examinations  of  stock,  and  the  like. 


'i  'I 


)e  made,  either 
5  applied  to  the 
that  no  goods 
;  truckman,  nor 
e  sales  number 
hich  is  in  dupli- 
5t  clerk  far  less 
vould  be  at  first 
itions  to  which 
elivery  of  goods 
;  is  a  conspiracy 
iving  the  ability 
nd   duplicating, 
readily  suggest 
include,  among 


** 


•ffm^m 


i 


i 


1 


CUSTOMERS'    PAY    CARDS 

A  very  convenient  style  of  customer's  pay  card  is  formed  of  a 
sheet  of  good  ledger  pape  7^  inches  wide  by  8i  inches  long, 
folded  in  the  centre  lengthwise.  The  card  thus  folded  is  printed 
on  all  four  pages,  with  proper  debit  and  credit  spaces.  There  is 
first  in  the  debit  space  the  name  and  address  of  the  customer, 
together  with  the  name  of  the  house  carrying  the  account,  and 
space  for  recording  the  customer's  ledger  number.  Below  this 
and,  for  convenience,  turned  the  opposite  way  on  the  page,  is  a 
blank  account  form,  having  columns  for  date  and  for  the  amount 
of  the  purchase,  following  which  is  a  column  for  the  sales  num- 
ber and  a  liberal  space  for  terms  of  payment.  In  the  form  illus- 
trated herewith,  which  is  essentially  the  same  as  that  employed 
by  several  prominent  instalment  houses,  the  debit  space  allows 

for  twelve  charges. 

The  other  three  pages  of  the  pay  card  are  devoted  to  credit 
amounts  or  payments.  The  pages  are  ruled  with  a  column  for 
the  date,  a  column  for  the  amount  paid,  following  which  is  a|pace 
for  the  collector's  name.  To  the  right  of  this  is  a  second  date  col- 
umn and  a  space  for  a  brief  report  concerning  any  matters  which 
come  to  the  collector's  attention,  to  be  recorded  in  the  briefest 
manner  by  any  convenient  code.  This  code  should  be  based  upon 
the  plan  of  having  all  ordinary  statements  which  customers  make 
either  of  promises,  or  reasons  for  failure  to  pay  on  time,  or  of 
other  particulars,  indicated  by  letters  or  combinations  of  letters 
or  figures.  A  single  letter  or  character,  therefore,  could  indicate 
what  it  would  otherwise  require  a  lengthy  statement  to  record. 


iL 


ACCOIJNTIXG    SYSTEM 


•11 


is  formed  of  a 
inches  long, 
[led  is  printed 
:es.  There  is 
the  customer, 
account,  and 
.  Below  this 
the  page,  is  a 
:)r  the  amount 
he  sales  num- 
the  form  illus- 
that  employed 
t  space  allows 

oted  to  credit 
1  a  column  for 
diich  is  a  ^pace 
;cond  date  col- 
matters  which 
in  the  briefest 
be  based  upon 
ustomers  make 
on  time,  or  of 
tions  of  letters 
,  could  indicate 
nt  to  record. 


■     When  a  customer  ope.is  an  account  with  the  house,  pay 
cards  of  this  form  are  made  out  in  duplicate,  one  copy  gomg  to 


FIRST  AND  FOURTH  PAGES  OF  CUSTOMER'S  PAY  CARD 


the  customer  and  the  other  being  retained  by  the  merchant  for 
the  use  of  his  collectors  and  ledger  keepers.  The  pay  cards  are 
commenced  .by  entering  thereon  the  charge  for  the  goods  bought, 
with  notation  of  terms.  The  copy  delivered  to  the  customer 
serves  to  keep  him  informed  of  what  he  is  expected  to  do  at  all 
times,  and  the  copy  used  by  the  collector  serves  to  keep  him 
posted  as  to  the  dates  that  payments  are  due.  The  customer  s 
copy  serves  the  purpose  of  a  receipt  for  the  payments  made,  thus 


212 


THE    SELF-PROVING 


facilitating  the  work  of  the  collector,  while  the  copy  in  the  hands 
of  the  collector  forms  the  basis  of  his  report  to  the  office  of  the 


CndK 

^"  ' 

«™      1 

^  ! 

ertnnniiMi  ^^^^S- 

BnxAikmH                 ! 

MAM* ■ — 

.n     1 

^     1 

HUUTMriHIII 

fmmntm 

*ML 

BiMfhi  lorwud 

1 

• 

._fiEl^ 



_ 

__ 

_^ 

Second  and  Third  Pages  of  Customer's  Pay  Card 

collections  made.     It  is  also  his  reminder  of  when  he  should  call 
again. 

On  every  pay  card  there  should  be  a  notation  of  the  cus- 
tomer's sales  number.  This,  as  a  basis  of  cross  reference,  serve* 
a  very  useful  purpose.  The  customer  calls  at  the  office  for  the 
purpose  of  making  a  payment  or  making  some  inquiry  concern- 
ing the  account,  and  which  necessitates  a  reference  to  the  ledger. 
The  most  natural  thing  in  the  world,  under  the  circumstances,  is 


n,rcsm 


^  in  the  hands 
e  office  of  the 


Cndlt 

,,„    auitnnMi 

mm* 

JUL 

jm. 

' 

he  should  call 

on  of  the  cus- 
;ference,  serve* 
t  office  for  the 
iquiry  concern- 
;  to  the  ledger, 
rcumstances,  is 


ACCOUNTING    SYSTEM 


218 


'o  ask,  "Have  you  your  pay  card  with  you?"    Th.s  bemg  pro- 
duced, the  receiviug  clerk  uo.es  a.  ouce  the  sales  uumber,  aud 
turniug  to  the  Sales  Record,  at  ouee  obtains  the  ledger  uumbcr, 
with  far  less  work  than  would  be  necessary  if  the  customer  s  name 
had  been  asked  and  reference  made  ,0  an  alphabet.cal  .ndex^ 
Where  a  large  number  of  accounts  are  open,  as  ,s  the  case  m  the 
instalment  business,  it  frequently  occurs  that  there  are  acons.der- 
able  number  of  names  so  nearly  alike  that  ,t  ,s  difficult  to  dis- 
tinguish between  them,  particularly    by  sound       The  correct 
nal  is  found  in  some  cases  only  by  identification  by  means  of  the 
street  address.     On  the  other  hand,  sales  numbers  >-  "ever  du- 
plicated, and  therefore  the  method  of  rcachuig  the  ledger  above 
described  becomes  specially  desirable. 

.  The  pay  card  is  only  a  duplicate  of  the  ledger  account,  and 
therefore,  if  by  accident  it  is  lost  or  destroyed  it  can  be  restored 
by  making  a  copy  from  the  ledger.  Inasmuch,  also,  -  '^e  offic. 
pay  card,  that  is,  the  copy  which  the  collector  uses  ts  only  a  dup^^■ 
cL  of  the  one  which  the  customer  retains,  it  ts  Ukewtse  poss.ble 
to  restore  what  is  lost  by  comparison  in  that  direc,  :o„.  As  a  fact, 
it  is  found  in  practice  that  pay  car.ls  are  seldom  lost  or  destroye  , 
and  therefore  the  precaution  which  some  beginners  at  the  bus. 
ness  feel  that  it  is  necessary  to  take-namely,  keepmg  a  record  of 
Tcards  that  are  taken  out  by  coUector^is  entirely  unneces- 

'"' A  supervision  and  periodical  examination  of  the  pay  cards  is 
desirable,  particularly  in  the  sense  of  watching  the  work  of  the 
cictor  and  in  general  supervision  of  the  coUe  -n  department^ 
This  may  be  accompHshed  in  part  by  the  manager  handling  the 
pay  cards  at  stated  intervals,  aud  it  is  also  partially  accom- 
plished by  the  reports  of  the  bookkeeper  or  ledger  keepers,  who 
hat  Istant  occasion  to  use  the  cards  in  connection  with  ledger 
work. 


;T!' 


814 


THE    SBILF-PROVING 


The  pay  card  is  the  natural  foundation  of  all  letter  writing, 
where  it  is  necessary  to  communicate  with  the  customer.  It  also 
forms  the  foundation  of  communication  with  the  collection  attor- 
ney or  solicitor  of  the  establishment,  where  it  is  necessary  to  put 
the  account  in  the  way  of  formal  collection.  At  every  hand  the 
pay  card  is  required.  If  an  adequate  means  of  caring  for  the  pay  ^ 
card  is  provided,  then  supervision  and  their  constant  use  will  en- 
sure their  being  kept  in  proper  place.  j 

It  is  sometimes  urged  by  those  who  are  not  acquainted  with 
the  requirements  of  the  instalment  business  that  keeping  an  ac- 
count with  each  customer  on  the  ledger,  and,  in  addition,  main- 
taining duplicate  account  on  the  pay  card,  posting  every  entry 
that  occurs  to  each,  and  keeping  not  only  the  ledger  properly  in- 
dexed, but  the  pay  cards  so  assorted  as  to  make  the  latter  just 
as  available  on  call  as  the  accounts  in  the  former,  is  doing  double 
work.     New  beginners  at  the  business  frequently  set  about  devis- 
ing plans  by  which  this  apparently  extra  work  shall  be  overcome, 
or  the  necessity  for  it  removed.     When  it  is  recalled,  however, 
that  in  other  lines  of  trade  every  customer  receives  a  statement 
of  account  the  first  of  each  month,  and  that  in  those  lines  where 
collectors  are  employed  duplicate  statements  and  collection  Hsts 
are  freely  made  out  from  time  to  time,  it  becomes  apparent  that 
as  a  fact  there  is  less  duplication  of  work  in  the  instalment  busi- 
ness, with  the  system  of  customers'  pay  cards  in  use,  than  in  al- 
most any  other  line. 

By  the  methods  recommended  in  connection  with  the  Self 
Proving  Accounting  System,  the  customer  at  the  outset  is  fur- 
nished with  an  invoice  which  is  a  duplicate  of  the  charge  sheet, 
from  which  the  amount  with  which  his  account  is  opened  in  the 
ledger  is  posted.  On  the  back  is  a  duplicate  of  the  signed  lease 
or  contract.  Then,  in  turn,  the  customer  is  furnished  with  the 
Pay  Card,  which  is,  in  fact,  a  duplicate  of  the  ledger  account,  for 


UILUmi  i'iir»'a» 


;tter  writing, 
mer.  It  also 
lection  attor- 
essary  to  put 
ery  hand  the 
g  for  the  pay 
it  use  will  en- 

ijuainted  with 
eeping  an  ac- 
Idition,  main- 
y  every  entry 
;r  properly  in- 
;he  latter  just 
doing  double 
t  about  devis- 
be  overcome, 
lied,  however, 
;s  a  statement 
se  Unes  where 
:ollection  lists 
apparent  that 
stalment  busi- 
se,  than  in  al- 

wiih  the  Self 
;  outset  is  fur- 
;  charge  sheet, 
opened  in  the 
le  signed  lease 
ished  with  the 
er  account,  for 


215 
ACCOUNTING    SYSTEM 

his  record  of  the  transaction,  inclnding  additional  purchases  if 
"any,  and  payments  as  they  are  made.  In  due  cottrse  the 
Pay  Ca  d  wil  show  that  the  obligation  incurred  when  the  pur- 
chase Cas  made  has  been  duiy  discharged  by  the  payments  made, 
and  which  have  been  received  for  thereon.      ^^     ^^^  ^ 

Every  one  will  admit  the  desiraniiity  oi  t  ,     -^v,  , 

supplied  with  an  invoice  in  some  such  manner  as  th,s,  and  w,th  a 
dement  of  account  or  passboo.  recording  the  ^^sjent  e. 
tries  in  connection  with  the  purchases  as  they  are  made.    How 
the  collections  may  be  managed,  there  is  the  "eed  also  of  a 
tatement  of  each  account  for  the  collector.    This  ,s  afforded  m 
ircrnvenicnt  shape  by  a  duphcate  of  the  customer's  pay  car 
lof  which  goes  to  show  that  the  pay  card  plan  ,s  econom,ca  as 
1,  alconvLent.    Customers'  pay  cards  are  arranged  m  pads 
:::  :L  onginal  and  duplicate  are  readily  -^-ut  tog.he 
carbon  process,  thus  lessening  work  m  this  regard.    The  o  gma 
hJw  ver,  should  be  in  ink  and  not  in  pencil,  but  thts  cond.uon 
readily  complied  with  by  employing  a  specal  pen,  adapted  for 
s  ,ch  workand  some  of  the  best  grades  of  carbon  papers  ha.  ar 
,lJ  market      It  is  possible  to  make  a  carbon  duphcate  of 
:::;:ri"tMs  way  .most  as  easily  as  a  d.pHcate  of  pencil 

""'nans  which  make  use  of  pay  cards  are  much  better  than 

some  of    hose  which  formerly  prevailed  in  the  instalment  bust- 

It^  as  they  did,  the  carrying  around  of  the  ongmal 

ness,  mvolvmg,  as  they       ,  ^^^^^^^^  mortgages, 

Uases  or  ^ntract^-    T^     e-^^  -       ^^^  ^^  ,^,^^^  ,^  ,„„,„,.,,, 
rbTtrpTe  :.rm:rh':d  -nstruments  that  are  carefully  and 

tematicai;  preserved  in  the  office,    ^hey  are  ahva,.  rea  y 
reference  whenever  it  is  necessary  to  examme  them.    In  the  case 
o,  a  chattel  mortgage,  it  can  be  filed  on  short  not.ce  ,f  such  a 
course  is  found  necessary. 


iii 


COLLECTION    BOOKS 

An  alternative  plan  for  consideration  in  place  of  the  pay  cards 
elsewhere  described  in  this  volume  is  a  collection  book  for  each 
collector.  The  books  should  be  of  convenient  size  for  carrying 
in  the  pocket  and  suitably  bound  to  be  durable.  The  books  are 
arranged  as  follows:— On  the  left  hand  pages,  either  in  alphabet- 
ical order  or  according  to  a  predetermined  route  Ust,  the  names  of 
the  customers  and  their  addresses  are  written,  with  particulars  of 
their  purchases,  the  amount  of  the  bills  and  the  terms  of  payment 
agreed  to.  On  the  right  hand  pages  are  arranged  in  columnar 
form  spaces  for  recording  the  payments,  each  column  having  its 
own  special  date.  Five  columns  to  the  month  3  re  provided.  On 
the  specified  dates  the  collector  calls  upon  the  customer,  and  on 
receiving  the  payment  enters  it  in  the  column  of  that  date.  A 
formal  receipt  is  given  the  customer  for  the  payment. 

The  amounts  of  successive  collections  on  a  given  date  are 
entered  in  the  column  for  that  date  on  ihe  several  pages  of  the 
book.  On  returning  to  the  office  the  collector  delivers  the  book 
to  the  receiving  clerk,  who  foots  the  amounts  recorded  in  the  book 
and  enters  the  total  in  ink  at  the  bottom  of  each  page.  The  sev- 
eral pages  are  similarly  summarized.  The  grand  total  thus  deter- 
mined represents  the  amount  which  the  collector  should  turn  over 

in  cash. 

The  amount  collected  for  the  day  is  entered  in  lump  m  the 
cash  book  to  the  credit  of  Instalment  Accounts,  and  from  the  col- 
lection books  the  postings  are  made  direct  to  the  individual  ac- 


if 


mwtmhmm 


ACCOUNTING    SYSTEM 


217 


5ay  cards 
for  each 
carrying 
tooks  are 
ilphabet- 
names  of 
iculars  of 
payment 
columnar 
laving  its 
led.  On 
r,  and  on 
date.    A 

date  are 

res  of  the 

the  book 

I  the  book 

The  sev- 
lius  deter- 
turn  over 

mp  in  the 
m  the  col- 
vidual  ac- 


counts in  the  instahnent  ledger,  the  same  as  elsewhere  described 
in  connection  with  customers'  pay  cards.  The  books  are  appro- 
priately indexed,  and  when  not  in  use  are  kept  in  a  safe,  to  be  de- 
Hvered  to  the  collectors  from  time  to  time,  according  to  dates  and 
routes.  This  plan,  while  being  different  in  detail  from  what  is 
reconmiended  in  this  volume,  has  been  found  to  work  very  satis- 
factorily in  certain  prominent  establishments. 


KEEPING    CUSTOMERS'    PAY    CARDS 
I,  is  exceedingly  important  that  tlte  office  file  ot  customer.' 
pav  cards  sho.dd  be  kept  in  sucl,  order  that  any  indmdnal  card 
may  be  instantly  referred  to  whenever  wanted,  either  .n  the  sens 
of  producing  the  card  when  the  customer  calls  w.th  -  l«>n-"'  " 
for  use  for  any  other  purpose  in  the  office.    The  c-ds  nnjs     1 
be  filed  in  such  a  form  that  each  individual  card  may  be  kept  n 
p  oper  place  a:  different  times,  with  respect  to  dates  of  payment 
Td  collectors'  routes.    A  very  convenient  method  of  fihng  cus- 
om ert'  cards  employs  a  series  of  pigeonholes  '^^^^^^^^ 
liues  to  correspond  with  the  time  divisions,  and  from  nght  to  left 
to  correspond  with  alphabetical  divisions.  ,..,.„ 

An  instalment  store,  doing  a  business  of  moderate  s,.e,    m- 
olovs  a  case  of  pigeon  holes,  four  deep  vertically,  and  .n  number 
froTrigh    to  leff  sufficient  for  the  necessary  alphabetical  d.v,- 
I     I.  U  illustrated  in  the  first  of  the  accompanymg  engrav- 
r     The  upper  section  in  each  alphabetical  dtvtston  ,s  devo  ed 
towards  pastle.    The  second  division  is  O-oted  .o  card     h 
oavments  on  which  become  due  the  present  week.    The  third 
ZZ  is  devoted  to  those  cards  on  which  the  Pay-- - 
due  next  week,  or  later,  while  the  bottom  division  is   M  scellane 
ou  •  and  is  u  ed  for  such  purposes  as  ma,  be  appropriate  with 
I  ca  ds  thus  assorted.    The  cards  are  carefully  examined  fom 
::::  time,  never  less  ,re,uently  than  once  each  week^  and  are 
.uoved  from  one  division  to  the  other  as  returned  by  the  c„u 
tors.    They  are  reasserted  from  time  to  time  as  the  route 


ACCOUNTING    SYSTEM 


210 


)S 

customers' 
vicinal  card 
n  the  sense 
)aynient,  or 
s  must  also 

be  kept  in 
of  payment 

filing  cus- 
d  in  vertical 
right  to  left 


ite  size,  em- 
d  in  number 
betical  divi- 
r^ing  engrav- 
n  is  devoted 
to  cards  the 
The  third 
ments  come 
"Miscellane- 
opriate  with 
amined  from 
reek,  and  are 
y  the  coUec- 
le  route  lists 


are  arranged  for  different  collectors.  The  division  in  which  the 
past  due  cards  are  placed  is  examined  daily,  because  all  the  cards 
therein  are  past  due,  and  selections  from  among  them  must  be 
made  for  the  different  collectors,  according  to  the  recorded  piom- 
ises  of  the  customers  to  pay. 

In  another  instance,  two  cabinets  arranged  very  much  in 
the  form  just  described,  are  contained  in  a  safe.     Their  appear- 


A  PiQEON-HoLE  Cabinet  for  Keeping  Customer's  Pay  Cards 

a  nee  when  the  safe  door  is  open  is  indicated  in  the  second  of  the 
accompanying  engravings.  Here  the  time  divisions  are  by  days 
instead  of  weeks,  and  are  arranged  in  vertical  columns,  while  the 
alphabetical  divisions  are  horiaontal.  By  examination  of  the  en- 
graving it  will  be  seen  that  the  photograph  from  which  it  was 
made  was  taken  on  Wednesday,  for  all  the  cards  of  the  Wednesday 
division  are  out,  indicating  that  the  collectors  had  left  the  office 


■1/^ 


14 


..J 


ACCOUXTINQ    SYSTEM 


221 


before  the  photographer  was  ready.  This  arrangement  of  cards 
does  not  provide  for  "Past  Dues"  as  a  separate  division,  but  is 
managed  upon  the  plan  of  handUng  all  the  cards  as  often  as  once 
a  week. 

Very  large  portfolio  or  telescopic  files  are  sometimes  em- 
ployed for  containing  the  office  set  of  customers'  pay  cards.     One 


A  Portable  Accordeon  File  for  Holding  Pay  Cards:-Closed  and  Open 

of  these  is  shown  in  the  third  and  fourth  of  the  accompanying  en- 
gravings, one  view  showing  it  open  and  the  other  closed.  It  will 
be  seen  that  the  file  is  six  divisions  in  width,  corresponding  to  the 


THE    SELF-rUOVINO 

business  clays  of  the  week,  while  the  divisior,  ^  in  the  opposite  direc- 
tion are  indexed  alphabetically.  Still  other  plans  are  ii.  use  for 
caring  for  customers'  cards,  ranging  from  the  most  elaborate  cabi- 
net work  on  the  one  hand  to  very  cheap  conveniences  on  the 

other. 

When  a  very  large  business  is  conducted  several  cabinets  or 
files  arranged  upon  one  or  the  other  of  the  plans  here  described 
will  be  found  necessary.     In  such  cases  each  cabinet  is  to  be  re- 
stricted to  some  geographical  division  of  the  trade  covered,  or  to 
a  single  collection  route.     The  individual  cards  should  carry  a 
refere'nce  to  the  f^les  in  \^hich  they  belong.     In  large  establish- 
ments in  the  cities,  where  vaults  are  a  regular  feature  of  store 
buildings,  the  cabinets  may  be  constructed  as  a  part  of  the  perma- 
nent furniture  uf  the  vault,  and  the  necessary  work  to  be  done  in 
connection  with  the  cards  can  then  be  performed  in  the  vault. 
In  smaller  stores  it  is  found  desirable  to  have  the  cases  or  cabinets 
built  of  a  portable  form,  so  as  to  be  readily  put  into  safes  over 
night.     Where  store  buildings  are  measurably  proof  against  Hre, 
or  the  office  is  away  from  special  fire  risks,  the  cabinets  containing 
the  customers'  cards  may  be  left  in  the  open  office.     When  the 
cabinets  are  left  in  the  office  some  of  the  sheet  metal  cases  which 
are  now  furnished  by  the  leading  office  equipment  companies 
serve  an  excellent  purpose,  for  even  where  a  fire  occurs  the  papers 
within  cases  of  this  kind  are  preserved  until  long  after  a  wooden 
case  would  be  consumed.     Instalment  merchants,  of  necessity, 
must  elect  for  thenselves  what  plans  to  pursue  so  far  as  these  de- 
tails are  concerned.     The  fundamental  requirements  are  accessi- 
'  bility  at  all  times,  convenience  in  handling  and  proper  subdivi- 
sions in  order  to  classify  according  to  the  dates  of  payments  and 
the  routing  plans  of  the  collection  department. 


■.v 


ite  direc- 
h  use  for 
rate  cabi- 
;s  on  the 


f 


ibinets  or 
described  • 
to  be  re- 
red,  or  to 
d  carry  a 
establish- 
e  of  store 
he  perma- 
De  done  in 
the  vault. 
)r  cabinets 
safes  over 
s^ainst  fire, 
containing 
When  the 
ases  which 
companies 
the  papers 
r  a  wooden 
i  necessity, 
IS  these  de- 
are  accessi- 
)er  subdivi- 
yments  and 


POSTING  THE  INSTALMENT  EEDGER 

Some  merchants  have  been  discouraged  when  investigating 
the  general  conditions  of  the  instalment  business  Ijv  the  large  of- 
fice machinery  apparently  necessary  for  properly  managing  ac- 
counts, on  which  the  payments  are  so  small.  The  instalment  busi- 
ness of  necessity  is  composed  of  many  small  items.  There  are  nu- 
merous customer,  buying  comparatively  small  amounts  of  goods 
each,  and  fheir  weekly  or  mcntlily  payments  are  in  still  smaller 
amounts.  The  number  of  entries  to  be  made  in  each  accouht, 
therefore,  becomes  ver\-  large.  For  example,  a  bill  of  goods 
amounting  to  $25  will  be  sold,  with  $3  paid  down  and  the  balance 
to  be  paid  in  forty-four  weekly  instalments  of  50  cents  each.  Busi- 
ness men.  accustomed  to  large  transactions,  are  therefore  appalled 
at  the  amount  of  bookkeeping  apparently  necessary  to  properly 
look  after  a  very  large  number  of  accounts  of  this  character.  The 
expense  of  taking  care  of  a  single  transaction  seems  to  be  so  great 
as  to  leave  no  margin  for  other  costs,  to  say  nothing  about  a  final 

profit. 

The  account  books  supplied  by  the  Self-Proving  Account- 
Book  Company,  and  described  in  detail  in  this  volume,  are  all  ar- 
ranged upon  a  plan  to  reduce  the  office  labor  to  a  minimum  and  to 
facilitate  such  proofs  step  by  step  as  will  insure  accuracy  of  result 
throughout  without  tedious  rechecking.  All  this  has  been  fully 
set  forth  on  other  pages.  In  addition,  however,  to  what  has  been 
elsewhere  presented,  a  glance  at  the  method  of  posting  the  Instal- 
ment Ledger  will  show  how  numerous  accounts  may  be  handled  in 


11 


ii 


'iff 


^ 


^„j  THE    SELF-rnOVINO 

this  book  in  a  «y  to  make  the  expense  very  mall  imleed 

As  elsewhere  ex,>hine,l,  .be  amount  ol  casb  eoUeCed  by  ach 
i„„ivi.h,al  collector  is  en.erc.1  on  Ibe  pay  canls  as  it  is  reccved.  or 
;  a  collection  book.  i.  ,b.,,  P-an  is  employed.  Tbe  to.a  as  ,n^ 
dicatcl  bv  bis  report,  wbicb  is  entered  in  detail  n,  .be  collect  on 
book,  is  entered  in  n  .mBle  Uunp  in  tbe  casb  book  .o  .be  cred,.  of     . 

Ins.almcnt  Ledger.  

Tbe  cash  payments  which  are  made  across  the  eounte,  in  .be 
office  by  c„sto,ners  who  call  for  ,be  purpose  are  similarly  entered 
upon  .be  pav  cards,  or  in  a  special  office  collec.ion  book,  .f  that 
plan  be  followed,  and  in  ....„  are  bkewise  entered  in  gross  upon 
.  .be  casb  book.    Tbe  pay  carus,  or  collection  books,  therefore  con- 
tain all  tlu  details  of  paymen..    These  cards  or  books,  wbv.bever 
plan  is  employed,  are  in  form  .o  be  used  as  the  P"^""^  ^  '-'  " 
the  individual  accounts  in  .he  Instalment  Ledger.    To  tins  end 
.hey  are  firs,  sorted  up  in  proper  order  so  as  to  facib.ate  .he  work. 
Thev  are  .hereby  ei.her  arranged  in  .he  order  of  .he  sales,  or  lease 
numbers  which  .bey  bear,  or  according  .o  the  nurnbers  of  the  ac- 
counts in  the  ledger,  whichever  plan  best  smts  the  order  o  the 
ledgers,  and  in  a  way  to  make  necessary  as  li..le  turmng  from  fron. 
to  back  of  ledger  as  possible.    Where  the  accoun.s  are  so  numer- 
ous as  to  employ  several  ledgers  .be  books  or  cards  are  of  cours 
firs,  arranged  according  to  .he  individual  volumes,  and  .hen  each 
lot  is  sorted  according  .o  .be  arrangemen.  of  accounts  m  the  book. 
Tbe  entries  in  .he  cash  book  made  from  .he  collectors   re- 
por.s,  as  previously  described,  de.ermine  tbe  aggrega.e  of  .be 
amoun.  tba.  is  .obe  pos.ed  ,o  tbe  credi.  of  the  indmdua  accounts 
in  .be  ledger.  Tbe  amounts  en.ered  in  .he  cash  book,  bemg  ex- 
tended to  tbe  credit  of  the  pair  of  columns  devoted  to  Instalment 
Ledger,  determine  the  amount  that  will  post  to  the  cred.t  of  In- 
stalment Ledger  Account  in  .he  Priva.e  Ledger.    Lis  necessary, 
therefore,  to  know  that  tbe  postings  to  the  individual  accoun.s  .n 


I 


Ji;«a»»»*^«*****^^*'^^''"" 


!ecl. 

;ted  by  each 
received,  or 
total  as  in- 
le  collection 
the  credit  of 


)unter  in  the 
larly  entered 
book,  if  thnt 
1  gross  upon 
lerefore,  con- 
es, whichever 
ig  medium  to 
To  this  end 
ate  the  work, 
sales,  or  lease 
)ers  of  the  ac- 
;  order  of  the 
ing  from  front 
are  so  numer- 
are,  of  course, 
and  then  each 
its  in  the  book, 
collectors'  re- 
jregate  of  the 
ddual  accounts 
ook,  being  ex- 
l  to  Instalment 
ne  credit  of  In- 
It  is  necessary, 
iual  accounts  in 


■  !fS'-'.'i*S>M-'.W."" 


..^... 


IMAGE  EVALUATION 
TEST  TARGET  (MT-3) 


1.0 


U 


Ui,  1^    |2.2 


^  1^ 


2.0 

L25  iU    11.6 


«' 


V] 


r 


c 


/ 


/ 


L 


Photographic 

Sciences 

Corporation 


23  WIST  MAIN  STREET 

WEBSTER,  N.Y.  MSSO 

(716)873-4503 


«— I 


MMMMNHH 


ilii 


■m 


CIHM/ICMH 
Collection  de 
microfiches. 


Canadian  Institute  for  Historical  Microreproductions  /  Institut  Canadian  de  microreproductions  historiques 


ACCOUNTING    SYSTEM 

the  Instalment  Ledger  aggregate  a  corresponding  amount. 

This  posting  to  the  Instahnent  Ledger  may  be  done  m  the 
ordinary  manner,  and  for  proof  called  back  after  the  plan  pursued 
in  many  mercantile  establishments,  or  it  may  be  proven  by  the  re- 
verse posting  method  affected  by  some  bookkeepers,  but  a  far  bet- 
ter plan  and  one  that  has  proven  very  advantageous  wherever  em- 
ployed brings  into  requisition  an  adding  machine  such  as  the 
Comptometer,  which  is  illustrated  on  this  page,  and  saves  the  need 
of  proof  posting  in  all  cases  except  where  errors  actually  occur. 
With  the  cards  or  collection  books  properly  assorted,  and  as- 


GENERAL  View  of  the  Comptometer.    Made  by  the  Felt  and  Tarrant  Mfq.  Co., 

Chicago,  III. 

suming  that  two  clerks  can  be  devoted  to  the  work,  one  stands  be- 
fore the  ledger  at  the  desk,  and  the  other,  standing  or  sitting  near 
by,  handles  the  cards  and  at  the  same  time  operates  the  Compto- 
meter. The  ledger  number  of  the  first  card  is  called  and  the  clerk 
in  front  of  the  ledger  turns  to  the  required  page  and  calls  back  the 
name  of  the  customer,  thereby  indicating  that  the  right  account 
has  been  found.  The  first  clerk  then  calls  the  amount  of  the  credit, 
which  for  the  sake  of  illustration  we  will  say  in  this  case  is  50  cents. 


>' 


^^^^^S^  ji^«i,*jSpii4**i 


w 


226 


THE    SELF-PROVING 


As  this  amount  fifty  is  spoken  the  fingers  automatically  record 
50  cents  on  the  Comptometer.  At  the  same  time  the  item  is 
checked  on  the  pay  card  or  in  the  collection  book,  thereby  record- 
ing the  fact  that  it  has  been  posted  in  the  ledger. 

While  this  has  been  in  progress  the  ledger  clerk  has  made  the 
proper  entry  in  the  account  of  the  customer,  has  brought  the  blot- 
ting pad  over  the  ink  and  is  ready  for  the  next  account,  which  is 
handled  in  the  same  way.  The  number  is  called  to  be  used  in  find- 
ing the  account,  and  the  name  of  the  customer  is  called  back;  then 
the  first  clerk  names  the  amount  of  the  credit  while  recording  the 
same  on  the  Comptometer.  Then  he  checks  the  pay  card  or  in  the 
collection  book.  The  ledger  clerk  posts  the  amount  that  has  been 
called  and  is  ready  for  the  next  operation. 

The  work  proceeds  in  this  manner  with  probably  three  to  five 
times  the  speed  that  is  attained  by  the  ordinary  bookkeeper  in 
posting  from  journal  or  cash  book  to  ledger  in  the  usual  manner, 
while  the  Comptometer  keeps  tab  on  the  accuracy  of  the  work. 
The  amounts  handled  are  thus  faithfully  recorded  by  the  machine, 
which,  being  a  total  adder,  shows  at  the  completion  of  the  work 
the  amount  which  has  been  posted,  and  which,  if  all  is  correct, 
agrees  with  the  total  previously  determined  in  the  cash  book. 

In  this  manner  hundreds  and  even  thousands  of  accounts  are 
posted  by  two  clerks  operating  together  in  the  early  hours  of  the 
forenoon  of  the  day  following  the  day  of  collection.  The  labor  on 
each  account  is  so  slight  and  can  be  performed  so  expeditiously 
that  there  is  no  excuse  for  the  books  being  unposted  later  than 
noon,  no  matter  how  numerous  the  collections  of  the  previous  day 
have  been.  The  work  is  so  simple  in  character  that  under  the 
charge  of  a  general  bookkeeper  the  posting  may  be  performed  in  a 
dozen  ledgers,  if  so  many  are  required,  by  clerks  who  have  no  claim 
to  the  title  of  bookkeeper  in  themselves,  and  yet  correctly,  done  in 
all  particulars.    Any  young  man  or  young  woman  of  average  in- 


1^ 


ACCOUNTING    SYSTEM 


227 


:ally  record 
the  item  is 
eby  record- 
as  made  the 
;ht  the  blot- 
nt,  which  is 
used  in  find- 
i back; then 
jcording  the 
ard  or  in  the 
liat  has  been 

three  to  five 
okkeeper  in 
;ual  manner, 
of  the  work, 
the  machine, 
of  the  work 
11  is  correct, 
5h  book, 
accounts  are 
hour?  of  the 
The  labor  on 
expeditiously 
ed  later  than 
previous  day 
at  under  the 
erformed  in  a 
have  no  claim 
-ectly  done  in 
)f  average  in- 


telligence, writing  a  decent  business  hand  and  giving  careful 
thought  to  the  work,  is  entirely  competent.  The  cost,  therefore, 
is  measured  largely  by  the  grade  of  help  necessary. 

Referring  again  to  the  sorting  of  the  cards  with  respect  to 
lease  numbers  or  ledger  numbers  in  the  several  volumes  in  which 
the  ledger  may  be  divided,  it  should  be  remarked  that  such  prelim- 


FOOTINQ  THE  LEDGER  BY  USE  OF  THE  COMPTOMETER 

inary  work  is  not  absolutely  necessary.  Many  bookkeepers  prefer 
it  because  it  enables  thfem  to  handle  the  leaves  of  the  ledger  in  reg- 
ular course,  and  thereby  avoids  turning  from  front  to  back  and 
back  to  front,  which  is  always  more  or  less  confusing  to  the  ledger 
keeper,  and  which  also  produces  a  certain  amount  of  wear  upon  the 
ledger  itself.  Each  individual  office  will  establish  its  own  routine 
in  matters  of  this  kind,  to  be  largely  determined  by  the  preference 
of  the  head  bookkeeper  or  manager  in  charge.  It  should  also  be 
remarked  that  it  is  not  absolutely  necessary  that  the  ledger  keep- 
ers should  work  in  teams  as  above  suggested.  All  the  work  may 
be  done  by  one  clerk  if  required,  who  would  check  the  pay  cards  or 
collection  books  and  keep  tab  of  the  amounts  on  the  Comptometer 


i 


I 


..jllgiilMlifiiiriirtilrfrT  I  TmrWTf^' 


-1^  ^   liiMfillHI 


228 


THE    SELF-PROVING 


at  the  same  time.  The  Comptometer  as  an  aid  in  posting  is  an  as- 
sistant which  every  bookkeeper  greatly  appreciates  after  once  be- 
coming famiUar  with  it. 


ig  IS  an  as- 
;r  once  be- 


COLLECTION    DEPARTMENT 

The  proper  conduct  of  an  instalment  business  demands  a 
collection  department,  properly  organized  and  thoroughly  ad- 
ministered. In  a  small  business  this  work  will  be  done  under 
the  immediate  eye  of  the  proprietor,  who,  no  doubt,  will  act 
likewise  in  the  capacity  of  credit  man.  In  a  large  establishment, 
on  the  other  hand,  business  routine,  of  necessity,  will  take  the 
place  of  personal  supervision  of  the  merchant. 

Whether  elaborately  planned,  as  for  a  large  business,  or.  re- 
stricted to  the  work  of  the  proprietor,  assisted  ly  his  salesmen 
and  regular  office  force,  the  collection  department  subdivides  into 
two  grand  divisions.  There  is  first  the  office  work,  which  in- 
cludes the  proper  conduct  of  the  books,  the  periodical  supervision 
of  the  accounts,  the  preparation  of  route  lists  for  collectors,  the 
receipt  of  moneys  paid  by  customers  at  the  office,  the  necessary 
correspondence  with  customers  and  attention  to  delinquents  and 
to  all  cases  that  require  recourse  to  legal  measures  or  that  are  in 
any  respect  irregular. 

The  other  grand  division  includes  everything  outside  of  the 
office,  and  in  some  cases  is  subdivided  into  two  fields  or  classes. 
The  first  includes  the  customers  who  are  located  close  to  each 
other  and  within  a  short  radius  of  the  store,  and  the  second  the 
customers  situated  at  a  considerable  distance  from  the  store,  and 
who  are  more  scattered  and  further  apart.  Whether  the  outside 
work  be  regarded  as  a  unit  or  subdivided  into  parts,  as  mentioned 


!■• 


THE    SBI-F-rnOVIN'O 


above,  the  work  to  be  done  and  the  supervision  to  be  exercised  is 

essentially  the  same. 

Customers  whose  purchases  were  made  upon  the  agreement 
to  pay  the  collectors  at  stated  intervals  must  be  promptly  waited 
upon  at  the  agreed  dates  wherever  located.  Any  lack  of  prompt- 
ness in  this  regard  by  the  establishment  is  a  notice  to  the  customer 
of  laxity,  of  which  he  is  prone  to  take  immediate  advantage.  If 
the  house  is  not  prompt  in  demanding  what  is  its  proper  due, 
then  the  customer,  in  a  sense,  feels  released  from  his  obligation  of 

promptness. 

While  it  is  to  the  interest  of  the  merchant,  as  is  elsewhere  set 
forth  in  this  volume,  to  be  extremely  considerate  of  his  customers' 
interests  and  to  be  lenient  with  them  in  times  of  disaster  and  dis- 
tress, and  in  all  respects  to  show  the  most  friendly  feeling  to  those 
who  are  indebted  to  him,  still  business  is  business,  and  a  friendly 
or  benevolent  feeling  should  never  be  allowed  to  descend  to  care- 
less administration.  Customers  should  be  visited  regularly  by 
collectors,  whether  payments  are  made  or  not,  for  the  very  good 
reason  that  it  is  essential  to  the  merchant  to  know  at  all  times  of 
the  whereabouts  of  the  goods  which  are  the  security  for  his 
claim,  and  also  the  general  condition  of  his  customer  with  refer- 
ence to  his  paying  abiUty. 

Not  a  little  of  the  success  of  the  collection  department  de- 
pends upon  the  character  and  qualifications  of  the  men  who  are 
employed  as  collectors.  Some  men  are  born  collectors.  Other 
men,  with  most  excellent  qualifications  in  other  directions,  are 
utterly  unable  to  collect  money,  either  for  themselves  or  their  em- 
ployers. Some  men  have  special  aptitude  for  work  of  this  kind, 
and  are  able  to  detect  instantly  the  difference  between  a  trumped- 
up  excuse  for  a  failure  to  pay  and  an  honest  statement  of  real  dis- 
tress. Such  men  are  also  able  to  press  a  claim  without  giving  of- 
fence.    Other  men,  on  the  contrary,  are  so  bunglesome  in  their 


Mlili 


ACCOUNTING    SYSTEM 


lercised  is 

jgreement 

ly  waited 

If  prompt- 

custonier 

itage.     If 

loper  due, 

igation  of 

;\vhere  set 

ustomers' 

r  and  dis- 

g  to  those 

a  friendly 

id  to  care- 

^ularly  by 

very  good 

ill  times  of 

ty  for  his 

with  refer- 

•tment  de- 
n  who  are 
■s.  Other 
:tions,  are 
r  their  em- 
this  kind, 
I  trumped- 
of  real  dis- 
giving  of- 
le  in  their 


methods  as  to  leave  a  bad  impression  wherever  they  go,  and  to  do 
the  house  an  injury  in  reputation  even  with  customers  who  have 
the  money  ready  to  pay  the  instant  the  collector  calls. 

Too  great  care,  therefore,  cannot  be  taken  in  the  selection  of 
the  collectors  of  the  establishment.  The  same  considerations 
prevail  to  a  certain  extent  in  the  selection  of  the  receiving  clerk  of 
the  establishment — the  one  who  meets  the  customers  who  call  to 
pay  their  weekly  or  monthly  instalments.  Courtesy  in  both  cases 
is  a  prime  requisite.  No  customer  of  the  establishment  should 
ever  be  spoken  to  by  proprietor,  collector  or  receiving  clerk  with- 
out the  impression  being  left  in  his  mind  that  he  is  dealing  with 
gentlemen  who  are  considerate  and  kind  in  the  extreme.  Uni- 
form and  intelligent  courtesy,  will  facilitate  collections,  while 
grufif  and  thoughtless  treatment  will  drive  customers  away. 

Addressing  credit  merchants  of  both  large  and  small  opera- 
tions, as  is  the  province  of  this  book,  all  remarks  with  respect  to 
the  collection  department  must,  of  necessity,  be  presented  in  the 
most  general  terms.  The  ideal  collection  department  for  a  busi- 
ness of  given  size  would  be  too  large  or  too  small  for  an  enter- 
prise of  some  other  m;  gnitude,  and  therefore  all  directions  must 
be  restricted  to  advice  on  leading  points,  leaving  to  the  indi- 
vidual merchant  the  task  of  adapting  to  his  special  requirements 
such  portions  as  meet  his  particular  needs. 

Of  the  inside  or  .  iiice  work  to  be  done  in  the  immediate  in- 
terest of  the  collection  <  epartment,  the  periodical  examination  of 
the  lease  accounts,  or  instalment  accounts,  as  they  are  very  com- 
monly termed,  is  one  of  the  most  important  duties.  If  the  busi- 
ness is  large  enough  to  warrant  it,  this  work  should  be  the  special 
duty  of  one  man,  under  the  general  direction  of  the  manager. 
His  duty  would  be  to  watch  customers'  accounts  in  a  way  to  check 
the  work  of  the  collectors,  and  to  be  in  position  to  lay  out  their 
work  and  establish  their  routes  from  time  to  time.     Supervision 


n 


•^m» 


-    ^^ 


JJ 


232 


THE    SET-I'-rUOVIXQ 


of  customers'  accounts,  in  the  sense  in  which  the  term  is  em- 
ployed, means  entire  familiarity  with  the  ledger,  going  over  it 
from  time  to  time  in  a  way  to  notice  whether  or  not  payments 
are  being  made  with  proper  regularity.  It  also  includes  the  v.ork 
of  examining  collectors'  reports  from  day  to  day,  in  order  to  keep 
constantly  in  touch  with  the  paying  condition  of  each  individual 
customer. 

By  this  work  not  only  does  the  person  who  supervises  the  , 
accounts  learn  to  judge  of  a  customer,  but  he  also  learns  to  judge 
of  the  success  of  a  collector,  as  well  also  of  the  collector's  reliabil- 
ity.    Dishonest  men  are  sometimes  found  among  collectors,  as 
well  as  elsewhere.     Carelessness  very  frequently  precedes  dishon- 
esty.    In  fact,  it  is  the  general  rule,  save  only  in  cases  where  the 
collector  is  already  a  hardened  offender.     All  that  has  beeen  said 
with  respect  to  holding  the  customer  closely  to  the  terms  of  pay- 
ment originally  agreed  to  applies  with  double  force  to  the  man- 
agement of  the  collectors.     Not  only  should  the  collectors  be 
held  to  the  work  of  visiting  the  customers  on  their  respective 
lists  at  the  proper  date,  but  their  reports  to  the  effect  that  they 
have  so  visited  these  customers  should  be  regularly  inspected, 
and  from  time  to  time  should  be  verified  by  the  plan  of  quiet  in- 
quiries in  their  respective  fields— in  other  words,  by  a  little  pri- 
vate detective  work,  entirely  justifiable  in  view  of  the  fact  that 
carelessness  is  so  easy,  and  that  when  carelessness  is  indulged  in  it 
soon  leads  to  still  more  reprehensible  practices.     Again,  the  re- 
ports of  collectors  very  frequently  contain  items  of  information 
which  suggest  the  necessity  of  instant  action  upon  the  part  of 
the  house  to  secure  its  claim.     Unless  the  collectors'  reports  are 
closely  and  promptly  scrutinized  and  the  results  of  their  work 
properiy  tabulated  in  a  way  to  reach  the  legal  department  of  the 
establishment  without  delay  many  an  opportunity  to  prevent  a 
loss  is  frittered  away. 


ACCOUNTING    SYSTEM 


233 


11  IS  em- 
over  it 

)ayments 

the  v.ork 
to  keep 

ndividual 

•vises  the 
to  judge 
s  reliabil- 
ectors,  as 
:s  dishon- 
,vhere  the 
)eeen  said 
ns  of  pay- 
the  man- 
ectors  be 
respective 
that  they 
inspected, 
f  quiet  in- 
little  pri- 
fact  that 
Lilged  in  it 
n,  the  re- 
formation 
le  part  of 
eports  are 
heir  work 
ent  of  the 
prevent  a 


An  important  part  of  the  office  work  in  connection  with  the 
collection  department,  and  which  should  come  under  the  general 
supervision  of  the  manager  of  the  collection  department,  is  the 
checking  of  the  ledger  in  conjunction  with  the  customers'  Pay 
Cards.  The  Pay  Cards,  which  form  the  subject  of  a  sjjecial  chap- 
ter in  this  book,  must  be  kept  up  to  date  and  must  have  upon 
them  every  entry  that  is  contained  in  the  ledger.  They  must  also 
be  always  available  for  the  use  of  the  collector.  The  collector, 
having  with  him  when  he  calls  upon  a  customer  the  Pay  Card 
that  is  a  duplicate  of  the  one  which  was  in  the  first  instance  de- 
livered to  the  customer,  and  which  also  is  a  duplicate  of  the  ledger 
account,  is  supported  in  his  collection  work  by  a  full  statement 
of  the  business  that  has  been  done  to  date.  He  is  therefore  in 
position  to  answer  any  proper  questions  about  the  account  and 
to  satisfactorily  adjust  any  misunderstanding  that  may  have 
arisen. 

It  is  an  easier  matter  for  the  manager  to  supervise  the  collec- 
tion department  by  sorting  over  the  Pay  Cards  and  using  them 
as  a  basis  of  his  conversation  with  collectors  and  any  inquiries 
that  may  be  necessary  to  make,  than  attempting  to  go  through 
the  ledgers.  At  the  s^me  time  the  ledger  keepers,  by  familiarity 
with  the  accounts  and  noticing  how  balances  are  being  carried 
forward  from  time  to  time  without  reduction,  are  in  position  to 
call  the  manager's  attention  to  all  flagrant  delinquencies.  By 
the  reports  of  collectors,  in  the  first  place,  and  by  the  reporl^s  of 
the  ledger  keepers,  in  the  second  place,  with  the  two  supple- 
mented by  personal  examination  of  the  accounts  in  the  conven- 
ient form  afforded  by  the  Pay  Cards,  the  manager  can  keep  posted 
on  a  very  large  number  of  accounts  with  far  less  labor  than  would 
be  required  upon  any  other  plan. 

The  daily  routine  to  be  followed  by  collectors  is  something 
to  which  great  care  should  be  given  on  the  part  of  the  managing 


r 


234 


THE    SET.F-rnOVlNO 


man.  No  two  collectors  left  to  their  own  resources  will  manage 
the  same  way,  so  far  as  making  their  returns  is  concerned,  nor  in 
reporting  the  items  of  information  regarding  which  the  merchant 
depends  so  much  tipon  them.  Good  management,  therefore, 
requires  that  a  definite  plan  or  method  be  outlined,  to  which  all 
the  collectors  of  the  establishment  are  held,  first  for  the  sake  of 
good  discipline  among  the  collectors  themselves  and  the  proper 
tabulation  of  results,  and  second,  and  more  particularly,  for  the 
benefit  that  system  has  upon  the  routine  work  of  the  office. 

If  any  argument  were  needed  in  support  of  the  proposition 
that  it  is  essential  for  the  manager  of  the  collection  department  to 
keep  everything  up  to  date,  and  that  he  should  always  conduct 
his  affairs  in  a  forehanded  manner,  it  is  afforded  by  what  occurs 
when,  through  careless  system  or  negligence,  a  collector  calls 
upon  a  customer  the  next  day  after  a  payment  has  been  made  at 
the  office.  Such  an  occurrence  is  very  annoying,  and,  in  many 
cases,  the  customer  sees  therein  the  opportunity,  ill  naturedly,  of 
course,  to  reflect  upon  the  business  system  of  the  estabhshment, 
if  not  upon  its  integrity.     All  this  follows  simply  because  a  sUp 

has  occurred. 

Such  an  event  as  a  collector  calling  for  an  amount  after  it  has 
been  paid  may  proceed  from  either  of  two  sets  of  circumstances. 
In  the  first  place,  a  customer's  account  may  be  past  due,  and  the 
manager  in  charge  of  the  lease  accounts,  noticing  that  the  pay- 
ment is  in  arrears,  may  make  a  speaal  point  of  putting  this  cus- 
tomer's card  on  the  collector's  list  for  special  work  the  next  day. 
.Route  lists,  of  necessity,  are  made  out  a  day,  or  at  least  a  few 
hours,  in  advance  of  their  use,  and,  as  it  sometimes  happens,  the 
customer  comes  in  with  the  payment  just  after  the  collector  de- 
parted with  orders  to  make  a  call  upon  him.    Again,  it  is  possible 
for  a  customer  to  anticipate  his  payments  by  one  or  two  days. 
In  such  instances,  if  the  customer's  card  is  not  at  once  withdrawn 


ACCOUNTING    SYSTEM 


280 


AW  manage 
ned,  nor  in 
e  merchant 
,  therefore, 
o  which  all 
the  sake  of 
the  proper 
irly,  for  the 
ffice. 

proposition 
partment  to 
ays  conduct 
what  occurs 
Hector  calls 
een  made  at 
nd,  in  many 
laturedly,  of 
tablishment, 
;cause  a  slip 


from  the  route  list,  in  case  it  has  been  there  entered,  or  if  the  pay- 
ment is  not  at  once  entered  on  the  cards,  in  case  the  card  is  m  the 
daily  or  weekly  case,  there  will  be  the  same  annoyance. 

The  remedy,  as  already  indicated,  is  to  have  the  work  well  in 
hand  and  to  make  instant  changes  in  collectors'  route  lists  when- 
ever payments  are  received.     In  turn,  if  the  customer  calls  after  a 
collector  has  gone  out  with  the  card,  it  is  necessary,  in  order  to 
avoid  misunderstanding,  to  inform  him  that  the  collector  is  al- 
ready  en  route  to  his  place,  and  thereby  forestall  the  rij^hteous  in- 
dignation that  otherwise  he  might  feel  called  upon  to  express. 
The  rule  should  be  rigidly  enforced  in  the  office  that  daily,  before 
the  bookkeepers  close  their  work,  every  card  representing  an 
account  on  which  a  payment  has  been  received  during  the  day 
shall  be  properly  posted,  thus  preventing  the  chances  of  accident 
of  the  kind  above  referred  to. 


t  after  it  has 
rcumstances. 
due,  and  the 
hat  the  pay- 
ing this  cus- 
he  next  day. 
t  least  a  few 
happens,  the 
collector  de- 
,  it  is  possible 
or  two  days, 
ce  withdrawn 


■jjiiiiifii»"y^.''t'<^'jffly!<^' 


A    COLLECTOR'S    ROUTINE 

The  pay  cards,  which  form  the  basis  of  the  collector's  work, 
are  k.pt  sorted  with  respect  to  routes  of  collectors,  and  also  with, 
respect  to  dates.     When  a  collector  has  had  delivered  to  him 
the  pay  cards  representing  his  work  for  the  day,  he  first  arranges 
his  route  list  by  a  proper  sorting  of  the  cards.     As  he  meets  each 
of  the  different  customers  he  records  upon  the  proper  pay  card 
the  amount  collected,  and  also  enters  upon  the  customer's  dupli- 
cate the  same  amount,  in  each  case  adding  his  name  or  initials. 
Where  the  customer  fails  to  pay  or  is  absent,  and  where  there  is 
any  other  fact  encountered  which  should  be  reported  to  the  office, 
he  records  the  same  in  the  column  of  the  pay  card  called  "Col- 
lector's Report"  by  means  of  the  code  number  or  letter.     Thus 
a  collector's  pay  cards  collectively  become  a  complete  report  of 

his  daily  work 

Reporting  to  the  office  at  the  dose  of  the  day,  the  collector 
summarizes  the  results  of  his  work  by  entering  upon  a  collection 
book,  which  may  be  characterized  as  an  auxiliary  cash  receipt 
book,  the  names  of  the  customers  who  have  paid,  at  the  same 
time  turning  over  to  the  cashier  his  pay  cards  and  the  money  that 
he  has  collected.     The  pay  cards,  as  elsewhere  described,  next  be- 
come the  posting  medium  to  the  Instalment  Ledger,  while  the 
amount  of  cash  turned  in  is  entered  in  lump  in  the  cash  book, 
with  the  amount  properly  extended  in  the  columns  to  the  credit 
of  Instalment  Ledger.    The  collector's  work  for  a  day  ended  in 
this  way,  he  is  ready  to  receive  the  cards  for  another  day's  effort, 
and  so  the  routine  continues. 


or's  work, 
I  also  with, 
ed  to  him 
it  arranges 
Tieets  each 
r  pay  card 
ler's  dupli- 
or  initials. 
;re  there  is 
)  the  office, 
ailed  "Col- 
:ter.     Thus 
e  report  of 

tie  collector 
a  collection 
:ash  receipt 
it  the  same 
money  that 
ed,  next  be- 
r,  while  the 
:  cash  book, 
o  the  credit 
lay  ended  in 
day's  effort, 


ACCOUNTING    SYSTEM 

In  many  establishments  customers'  cards,  kept  assorted  in 
cabinets,  as  elsewhere  illustrated  in  this  volume,  are  always  within 
reach  of  the  collectors  and  office  employes.  The  collectors  in 
such  cases  are  required  to  take  from  the  cabinets,  day  by  day, 
those  cards  which  represent  the  routes  or  districts  specially  as- 
signed to  them.  The  cards  are  returned  to  the  cabinets  by  the 
ledger  keepers  after  the  posting,  as  elsewhere  described. 

Whether  a  collector  is  regularly  to  call  upon  a  customer  or 
the  customer  is  to  make  payments  at  the  store  is  a  fact  very  gen- 
erally determined  by  conference  with  the  customer  at  the  time 
the  sale  is  made,  or  subsequently,  as  the  case  may  be.    A  collector, 
when  he  learns  that  he  is  to  regularly  look  after  a  given  account, 
always  has  the  opportunity  of  making  himself  agreeable  to  the 
customer  and  learning  through  conversation  just  what  hour  of  a 
certain  day  in  the  week  it  is  most  agreeable  to  have  him  call  for 
the  money.    A  good  collector  is  always  sure  to  be  on  hand  at,  the 
appointed  place  at  as  near  the  stroke  of  the  clock  as  possible. 
Promptness  of  this  kind  is  conducive  to  regular  payments  upon 
the  part  of  the  customer.     Collectors  have  the  opportunity  of 
regulating  their  engagements  so  accurately,  by  intelligently  ad- 
justing the  wishes  of  one  person  with  those  of  others,  and  from 
time  to  time  indicating  their  own  convenience,  in  a  way  to  brmg 
nearby  places  close  together  in  point  of  time,  that  they  can  ar- 
range to  call  upon  their  customers  week  after  week  without  the 
danger  of  so  much  of  a  variation  as  fifteen  minutes  from  any  fixed 

hour.  ^      , ,  ,  .  „ 

\mong  the  duties  with  which  collectors  should  be  specially 

charged  is  that  of  promptly  and  accurately  reporting  removals  of 
customers  from  one  place  to  another.  Where  the  collector  en- 
counters a  change  of  address  he  should  record  the  same  upori 
the  pay  card  by  drawing  his  pencil  through  the  old  address  and 
writing  tha  new  in  its  place.     On  his  return  to  the  office  he 


238 


THE    SELF-PROVING 


should  enter  a  change  of  address  in  the  proper  place  in  the  Change 
of  Address  Book,  and  at  the  same  time  should  place  his  initials  in 
the  column  referring  to  customers'  cards,  thereby  indicating  that 
the  change  has  been  posted  to  the  customer's  card.  The  interests 
of  the  office  will  also  be  served  if  he  changes  the  address  on  the 
customer's  dupUcate,  because  in  frequent  instances  the  custom- 
er's pay  card  is  brought  to  the  office  with  a  payment,  and  the 
change  of  address  thus  noted  on  the  face  facilitates  the  necessary 
office  references. 


i^- 


he  Change 
s  initials  in 
:ating  that 
le  interests 
ress  on  the 
he  custom- 
lit,  and  the 
e  necessary 


CANCELLED    SALES 

In  an  instalment  or  credit  business  it  occasionally  occurs  that 
sales  are  cancelled  after  they  have  gone  so  far  as  to  be  entered  in 
the  books  and  a  cash  payment  made.  The  bookkeeper  or  busi- 
ness man  then  has  presented  the  question  of  how  to  dispose  of  this 

entry. 

So  far  as  the  goods  are  concerned  they  must  be  restored  to 
stock  that  is  charged  to  Buying  Account  at  cost  prices.  So  far 
as  Selling  Account  is  concerned,  it  must  be  charged  with  the 
goods  at  the  price  at  which  they  were  sold.  Proper  reverse  entry 
must  also  be  made  between  Buying  and  Selling  Accounts.  So  far 
as  the  customer  is  concerned,  he  must  be  credited  with  the  amount 
for  which  he  has  been  debited.  In  turn,  he  must  be  charged  with 
the  cash  that  is  refunded  to  him. 

The  best  plan,  therefore,  is  to  treat  the  goods  the  same  as 
goods  returned,  elsewhere  described  in  this  book,  with  the  proper 
credit  posted  to  the  customer's  account,  as  described  above, 
whether  in  the  Instalment  Ledger  or  among  Sundry  Debtors. 
For  the  cash  refunded  a  proper  voucher  should  be  made  and  duly 
numbered.  In  due  course  the  amount  thus  paid  out  will  be  posted 
to  the  debit  of  the  customer's  account,  with  proper  notation  of 
the  voucher  number,  thus  closing  the  account. 

The  rule  to  be  observed  in  the  cases  of  cancelled  sales,  more 
briefly  expressed,  is  to  reverse  what  was  done  when  the  goods 
were  charged.  This  applies  as  well  to  the  cross  entry  between 
Buying  and  Selling  Accounts  as  to  other  matters. 


^-■«^;<fl;^^i(MMnMMinKiMH 


MMKKJiHiJgWtfliMifliitfif'**"" 


LT" 


»ini"iT.'~ 


MERCHANDISE    RETURNED 


In  other  parts  of  this  volume  we  have  shown  the  necessity  of 
properlv  recording  goods  coming  into  the  establishment  that  are 
bought' from  manufacturers  or  dealers  to  sell  again,  and  also  we 
have  dwelt  upon  the  necessity  of  recording  prices  so  that  as  the 
goods  are  sold  the  difference  between  cost  price  and  selling  price 
may  be  noted  in  a  way  to  form  the  basis  of  the  cross  entry  between 
Buying  Account  and  Selling  Account.     If  care  is  so  necessary  m 
these  details  with  respect  to  the  goods  that  are  regularly  bought 
and  sold,  then  care  should  also  be  taken  in  the  matter  of  takmg 
back  goods  that  have  once  been  sent  out,  that  the  necessary  en- 
tries may  be  properly  made.     As  a  rule,  merchants  are  careless  m 
this  regard,  but  carelessness  here  would  disarrange  the  general 
system  in  a  way  to  cause  confusion  where  otherwise  only  orderly 
methods  prevail,  and  to  defeat  the  end  in  view. 

Goods  that  have  once  been  sent  out  can  come  back  for  either 
of  two  general  causes.    The  goods  may  have  been  sent  out  simply 
on  approval  and  charged  to  the  customer,  or  they  may  have  been 
charged  to  the  customer,  supposing  that  he  would  retam  them, 
and  afterward  he  expresses  the  desire  to  exchange  them  for  some- 
thing else.     These  two  cases  are  practically  the  same,  and  all 
goods  so  coming  back  are,  of  course,  to  be  credited  to  the  cus- 
tomer at  the  price  at  which  they  were  charged  to  him,  and  are  to 
be  taken  back  into  stock  with  Buying  Account  debited' at  their 
original  cost. 


ACCOUNTING    SYSTEM 


i;41 


necessity  of 
ent  that  are 
and  also  we 

that  as  the 
selUng  price 
itry  between 
necessary  in 
larly  bought 
er  of  taking 
lecessary  en- 
re  careless  in 

the  general 
only  orderly 

ick  for  either 
nt  out  simply 
lay  have  been 
retain  them, 
lem  for  some- 
same,  and  all 
:d  to  the  cus- 
im,  and  are  to 
bitcdat  their 


?: 
Oote- 


urvcF  RETURNED.  "'-'89 

J.  F.  BROWN  &.  CO'Y 


a.«-T  auitH  •T«trf  f »« 
TORONTO,. 


.ia»_ 


CMtomrf'* 


mrf* 


.r  th.  flo«tf*  d.MriM  b.law.    ThM.  fle«dt  .r.  to  b.  put  In- 


th«r  Inttnietlens:- 
SarMr 


RM«I««4  onl,  th.  loed.  that  •f  ehwto-  •«-  l-ltl"!^- 


Oriqinal-Truckman'8  or 


CARTER'S  DlRECTION8,-{EXAMINE  SUCCESSIVE  PAQES) 


(1 


■HMMWiMM*' 


ftitt' 


THE    SELF-rROVIN'G 


The  other  case  is  where  the  customer  fails  to  keep  up  his 
payments  and  the  goods  are  either  voluntarily  surrendered  by 
him  in  satisfaction  of  the  account  or  are  forcibly  seized  by  tne 
dealer      In  either  of  these  latter  cases  the  price  at  which  the  cus- 
tomer's account  is  to  be  credited  is  one  thing,  and  the  price  at 
which  the  goods  are  to  be  taken  back  into  stock  is  altogether 
another     The  price  to  be  credited  to  the  customer's  account 
would  be  determined  in  the  one  instance  by  negotiation,  and  in- 
the  other  by  the  amount  in  the  account  remaining  unpaid.     In 
neither  instance  have  these  figures  any  particular  relationship  to 
the  real  value  of  the  goods.     In  some  sections  of  the  country 
where  goods  are  seized  a  formal  appraisement  is  necessary  in 
order  to  determine  the  amount  of  the  credit  to  the  customer's 
account.     In  some  instances  it  is  necessary  that  the  goods  should 
be  sold  for  the  customer's  account,  in  which  instance  the  instal- 
ment dealer  may  or  may  not  be  the  purchaser. 

So  much  with  reference  to  the  general  conditions  that  pre- 
vail and  which  are  stated  here  in  order  to  introduce  to  the  reader's 
attention  a  proper  form  of  procedure  in  such  cases.     The  truck- 
man or  carter  who  is  sent  after  the  goods  should  have  definite  in- 
structions where  to  go  and  what  to  do,  whether  they  are  goods 
returned  by  customers  for  exchange,  or  other  good  reasons,  as 
mentioned  above,  or  goods  that  have  been  used  which  are  to  be 
credited  to  the  customer's  account  at  prices  to  be  subsequently 
determined.     He  should  be  fully  informed  as  to  what  articles  he 
is  to  obtain.     In  all  probability  his  instructions  will  be  to  deliver 
the  goods  to  the  warehouse.     Then  the  warehouse  keeper,  in 
turn,  should  have  similar  information  relating  to  the  disposal  of 
the  goods  that  are  put  in  his  charge.     He  requires  to  know  also 
where  they  come  from  and  the  name  of  the  customer.     It.  is  also 
necessary  to  have  proper  records  in  the  office  of  the  transaction. 
One  general  form  and  a  single  writing  can  be  made  to  answer 


—  ■--j!Uai''<Wft!U.AW-iJlNlM8Pf '''  ^B 

life" 


ACCOUNTING    SYSTEM 


;ep  up  his 
ndered  by 
;ed  by  the 
:h  the  cus- 
le  price  at 
altogether 
's  account 
ion,  and  in- 
npaid.     In 
tionship  to 
he  country 
ecessary  in 
customer's 
)ods  should 
:  the  instal- 
ls that  pre- 
the  reader's 
The  truck- 
:  definite  in- 
y  are  goods 
reasons,  as 
:h  are  to  be 
ubsequently 
t  articles  he 
)e  to  deliver 
e  keeper,  in 
e  disposal  of 
o  know  also 
r.     It,  is  also 
■ansaction. 
de  to  answer 


fflncF  RF-TURNED.  '—^^ 

J.  F.  BROWN  &  CO'Y 


••■•T  Qum  •»•!«»  i**^ 
TOHONTO,. 


.18»_ 


Goto- 


^r  th.  .-d.  d.«rtb.d  b.l.w.     Th...  good.  .r.  ^'^^^^ 
Othar  Imtnietlen*: 

CarUr 


Fl.«.l«.d  on.,  th.  g..d.  th.t  .r.  eh..l..d  .nd  l«Ul.l.d 


WaMHwMniar 


First  Carbon  Copy-Warehouseman'8  Receipt 


244  THE    SELF-PROVING 

the  purpose  by  the  use  of  carbon  sheets,  especially  if  the  several 
copies  be  varied  in  the  color  of  the  paper  upon  which  they  are 
printed,  in  order  to  distinguish  them  apart,  and  also  in  the  ruhngs 
and  printed  headings  enough  to  adapt  them  to  the  different  uses. 
Fomis  for  this  purpose  that  are  in  satisfactory  use  m  a  lead- 
ing instalment  house  are  submitted  in  this  connection,  and  are 
arranged  on  successive  pages  in  the  way  in  which  the  different 
sheets  would  appear  when  prepared  by  the  carbon  process  above 
mentioned.     The  printing  on  the  first  and  second,  it  will  be 
noticed,  is  the  same,  and  is  in  the  form  of  instructions  to  the 
truckman  or  carter,  while  on  the  third  the  printing  is  somewhat 
varied,  being  in  the  form  of  a  receipt.     The  f^rst  is  the  truckman's 
directions,  the  second  is  the  warehouseman's  receipt,  while  the 
third  is  the  office  copy.    The  latter  is  essentially  the  inventory  of 
the  goods  coming  back  into  the  establishment,  and  is  to  be 
treated  accordingly.     The  prices  which  are  extended  upon  the 
warehouse  receipt  represent  the  credit  to  the  customer's  account, 
while  the  prices  extended  upon  the  third  sheet  or  office  copy  rep- 
resent the  charge  to  Purchases  or  Buying  Account-the  figures 
at  which  the  goods  are  returned  to  stock. 

Examination  of  the  form  will  show  that  line  numbers  have 
been  run  down  the  centre  of  the  sheets.    This  is  for  the  purpose 
of  facilitating  the  work.     Requisitions  for  goods  to  be  returned, 
like  all  others,  should  be  numbered  in  series,  the  first  set,  for 
example,  being  No.  i,  the  second  No.  2,  and  so  on.    Then,  by 
combining  the  number  of  the  slip  with  the  number  of  the  hne, 
there  is  given  an  indication  of  goods  by  which  it  becomes  easy  to 
Identify  any  article  of  a  given  lot.    This  plan  also  affords  a  method 
of  reference  for  use  in  tagging  the  goods  and  making  proper  ref- 
erences in  the  cost  book.     It  frequently  happens  that  u  i&  neces- 
sary to  keep  a  given  lot  of  goods  returned  in  storage  for  some 
time  before  they  can  be  disposed  of,  either  in  the  sense  of  return- 


t«r^ 


i*^ 


ACCOUNTING    SYSTEM 


245 


e  several 

they  are 
le  rulings 
rent  uses, 
in  a  lead- 
.,  and  are 

different 
ess  above  ' 
it  will  be 
ms  to  the 
somewhat 
ruckman's 

while  the 
ventory  of 
I  is  to  be 

upon  the 
's  account, 
;  copy  rep- 
the  figures 

mbers  have 
he  purpose 
le  returned, 
irst  set,  for 
Then,  by 
of  the  Une, 
mes  easy  to 
ds  a  method 
f  proper  ref- 
t  ii  is-  neces- 
ge  for  some 
se  of  return- 


jBpec  PgTURNED.  "-'89 

J.  F.  BROWN  &,  CO'Y 


a.f -T  OUtt"  •T«ttT  I««T 

TORONTO,. 


SECOND  Carbon 


COPY-OFFICE  RECORD  OF  CHARGE  TO  BUY.NQ  ACCOUNT 


— -Wm 


m 


THE    SELF-rnOVlNO 


ing  to  stock  or  selling.  In  such  cases  it  is  very  essential  that  the 
goods  should  be  tagged  in  a  way  to  be  identified  without  possibil- 
ity of  mistake.  A  convenient  plan  of  tagging,  therefore,  is  to 
combine  the  slip  number  with  the  number  of  the  line  on  which 
the  article  is  recorded.  For  example,  using  the  forms  submitted 
herewith  which  represent  Requisition  No.  189,  the  tags  are 
written  189-1,  189-2,  189-6,  etc.,  which  would  mean  Lot  No. 
189,  article  i ;  Lot  189,  article  2.  and  Lot  189,  article  6,  etc. 

Again  referring  to  the  blank  form,  it  will  be  seen  that  space 
is  provided  for  entering  the  customer's  ledger  number  on  the 
copy  used  as  the  warehouse  receipt,  and  which  contains  the  credit 
to  the  customer's  account.  On  the  other  hand,  on  the  copy  con- 
stituting the  office  form,  space  is  provided  for  entering  a  number 
taken  from  the  Goods  Bought  Record  or  Purchase  Record,  thus 
connecting  the  form  in  each  case  with  the  accounts  to  which  it 
refers.  The  space  provided  at  the  bottom  of  the  blank,  entitled 
"Remarks,"  may  be  used  for  the  record  of  any  facts  which  have  a 
bearing  upon  the  transaction,  and  which  are  not  provided  for 
above. 


•mms- 


al  that  the 
tt  possibil- 
fore,  is  to 
:  on  which 
svtbmitted 
;  tags  are 
1  Lot  No. 
,  etc. 

that  space 
ber  on  the 
5  the  credit 
;  copy  con- 
r  a  number 
ecord,  thus 
to  which  it 
[ik,  entitled 
hich  have  a 
rovided  for 


PRESERVING    ORIGINAL    PAPERS 

c    .       ^f  thP  Self-Proving  Accounting  System  is 
A  leadinc  feature  of  the  sen  rruvu  ^ 

registers  of  the  original  <locun,ents.     Ihe  —  ;;  ^'  ,„ 

as!enained  .he  wants  o. '-'"--"- -'nJ  1°:^;     Z  sales 

provide  (.)  the  invoice,  to  be  gtven  to  '■'J';"  ;;,;;,,,,„„,  ,„ 
,  1  t^v.P  retained  in  the  office,  and  U)  tne  uiic^ 

book  record, '»  «     'J  ^^  ,,,  .^  „„e  writing,  by  .i,e  use 

rr  rtrir:;.     In^nrntbe«s.et.^^^^^^^^^ 

body  the  directions  to  the  carter  or  memoran- 

,  A     t^KPiicniedbv  the  customer,  and  (,2)  ameniuia 

for  the  goods,  to  be  signea  uy  i»"^ 
dum  o.  fhe  deUvery.  to  be  retained  by  the  customer,  aiso  ali  by  one 

"'"to  nrake  a  single  writing  answer  for  several  purposes  is  only 
the  best  modern  business  practice  intelUgently  apphed,  but  to 
'^le  L  same  entirely  satislactory  lor  use  "^---^    " 
assortment  of  blanks  and  proper  apphances  '»    P^""^ 
forms  and  keeping  them  after  they  have  been  «"»;!-■"  ^^ 
other  place  we  have  described  order  sheets  and  mvotces,  and  m  st,U 
alother  place  we  have  similarly  discussed  the  forms  useful  m  the 
deUvery  department.    In  all  these  cases  there  ^'^^'^^^UZl 
blanks  and  conveniences  for  handUng  the  same.    To  the  latter  we 
now  direct  attention. 


248 


THE    SELr-PROVINO 


There  arc  a  consi(leral)le  ininiher  of  clips,  order  holders,  post 
binders  and  transfer  cases  in  the  market,  which  answer  a  very  sat- 
isfactory purpose,  and  therefore  we  luwe  nothing  original  to  pre- 
sent in  this  regard.     Our  illustrations  are  chosen  from  regular 


IN8ERT1NQ  A  SALES  SHEET,    WITH   ITS   DUPLICATES  AND  CARBONS  IN   A  HOLDER. 


catalogue  goods,  and  are  introduced  in  this  place  simply  for  the 
purpose  of  better  explaining  methods. 

When  an  order  or  invoice  is  to  be  entered,  or  any  other  docu- 
ment is  to  be  filled  out,  of  which  one  or  more  carbon  copies  are 
required,  there  is  need  of  a  holder  to  keep  the  several  sheets  in  cor- 


The  Holder  Closed. 


rect  position.  A  device  adapted  for  this  use  is  shown  in  two  posi- 
tions in  the  first  and  second  of  the  accompanying  engravings. 
The  first  shows  it  open,  with  the  order  sheet  and  its  complement 


ACCOUNTING    SYBTEM 


240 


„,  carbon,  :.nd  duHica."  LcinR  i"»cr.c,:.  an.Uhc  seen,,  I  shm  s  ^  = 
h„Mer  c.o,ea,  »»  i.  woul.1  appear  lyin^  on  a  .1«1<.  The  bolder  h  re 
shown  n«y  be  <le«ribed  as  a  pair  cl  boards  joined  together  at  the 


A  Locked  Post  Binder,  partly  filled. 


back  by  a  strong  clamp,  the  whole  being  properly  finished  to  se- 
cure durabiUty  and  neat  appearance.  The  device  is  so  constructed 
that  it  will  hold  firmly  any  number  of  sheets  up  to  one  hundred. 


A  Transfer  Binder,  partly  filled 


It  is  quickly  opened  for  putting  in  or  taking  out  the  sheets,  and  is 
iust  as  quickly  closed  after  the  sheets  are  inserted. 

For  filing  the  invoices  and  other  similar  papers  after  they  have 
been  properly  filled  there  is  required  some  device  adapted  to  re- 


250 


THE    SELF-PROVING 


ceive  the  sheets  one  by  one  as  they  are  ready  and  to  hold  in  perma- 
nent place  all  that  are  put  in  and  to  present  the  entire  lot  in  a  form 
equivalent  to  a  book.  For  purposes  of  ti  is  kind  there  is  nothing 
available  at  present  that  is  better  than  a  pest  binder,  one  style  of 
which  is  illustrated  in  .he  third  of  the  accon  panying  engravings. 
A  post  binder  consists  of  a  pair  of  board  backi,  each  furnished  with 
a  hinge  near  one  edge.  In  the  hinged  portior  of  one  of  these  backs 
two  rods  are  firmly  secured  in  place,  while  through  the  hinged  por- 
tion of  the  other  holes  are  punched  which  permit  the  cover  to  slip 
down  over  the  rods.  A  locking  or  clamping  device  is  provided 
adapted  to  fasten  the  second  cover  down  tight  against  whatever 


A  Locked  Post  Binder,  filled  and  opened  near  the  middle 

number  of  sheets  have  been  put  in  place  between  the  two  covers. 
Accordingly,  the  device  is  expansible  to  the  limit  of  the  length  of 
the  posts.  The  several  sheets  to  be  contained  in  the  binder  are 
perforated  in  a  way  to  correspond  with  the  posts  over  which  they 
are  placed.  When  the  binder  is  closed  by  clamping  down  the  sec- 
ond cover,  as  mentioned,  the  contained  sheets  are  held  in  position 
as  shown  in  the  cut.  To  illustrate  the  kind  of  a  book  that  results 
from  the  use  of  such  a  binder  we  introduce  the  fifth  cut  in  this 
series,  which  shows  a  binder  filled  and  opened  near  the  middle,  as 
would  be  required  in  a  case  of  reference. 


IMP 


1  in  perma- 
t  in  a  form 
is  nothing 
ne  style  of 
ingravings. 
lished  with 
hese  backs 
linged  por- 
Dver  to  slip 
s  provided 
t  whatever 


LE 


ACCOUNTING    SYSTEM 


251 


Books  of  loose  sheets  made  up  in  this  manner  are  much  to 
be  preferred  over  the  old  style  bound  book.  The  books  so  con- 
structed may  be  kept  without  change,  or,  by  way  of  econgmy, 
after  the  binder  is  filled,  the  sheets  composing  the  book  may  be 
transferred  to  a  cheaper  device  for  permanent  preservation,  one 
style  of  which  is  shown  in  the  fourth  illustration.  This  transfer 
binder  consists  of  a  pair  of  stout  covers,  with  threaded  metal  rods 
and  thumb  screws  for  closing  down  the  cover. 

There  are  several  varieties  of  arch  files  in  the  market  which 
are  adapted  to  hold  temporarily  papers  like  invoices,  memoran- 
dums, records  of  measurements,  &c.  They  work  upon  much  the 
same  plan  as  the  post  binder  here  illustrated,  using  sheets 
punched  to  correspond  with  the  wires.  They  have  the  special 
advantage  over  the  post  binder  of  permitting  the  ready  removal 
of  any  paper  without  disturbing  the  others.  Such  devices  are 
useful  auxilaries  in  an  office  and  are  practicalh-  indispensable 
wherever  a  complete  and  adequate  system  is  to  be  maintained. 
From  time  to  time  the  arch  file  is  emptied  and  its  contents  re- 
moved to  a  transfer  binder  of  suitable  construction  for  perma- 
nent preservation. 


two  covers. 

le  length  of 
binder  are 

which  they 

wn  the  see- 
in  position 

that  results 
cut  in  this 

;  middle,  as 


/- 


\ 


COMPLAINT    AND    INFORMATION    BOOK. 

In  the  office  of  every  merchant  who  conducts  business  upon 
the  instalment  plan,  and  who  accordingly  has  a  special  interest  in 
the  welfare  and  standing  of  his  customers,  as  well  as  in  their  good 
will,  there  should  be  maintained  what  may  be  described  as  a  Com- 
plaint and  Information  Book.  This  may  be  an  ordinary  blank 
book,  without  any  special  ruling.  It  is  to  be  kept  very  much  as  a 
diary,  with  dates  of  entries  from  time  to  time.  In  the  event  of 
the  entries  in  the  bdok  being  made  by  different  persons  they  are 
to  be  properly  initialled  or  signed. 

Whenever  a  customer,  either  by  personal  call  or  through  the 
medium  of  a  letter  addressed  to  the  house,  or  in  the  form  of  an 
oral  communication  to  the  collector  or  to  some  other  employe, 
makes  a  complaint,  no  matter  to  what  it  refers,  an  entry  to  that 
effect  is  to  be  made  in  this  book.  In  turn,  any  information  that 
relates  to  a  customer,  or  that  bears  upon  any  fact  whatsoever  in 
connection  with  the  business,  that  comes  to  the  knowledge  of  an 
employe  of  the  concern,  is  likewise  to  be  duly  recorded  in  this  book. 
The  book  thus  conducted  becomes  the  repository  of  a  vast  fund 
of  information  of  the  greatest  importr.nce  to  the  business,  and 
therefore  is  to  be  systematically  and  periodically  inspected  by  the 
proprietor  or  managing  man,  in  order  to  see,  first,  what  the  drift  of 
the  complaints  are,  with  a  view  to  correcting  whatever  is  wrong  in 
the  management  or  administration  of  the  establishment,  and, 
second,  to  see  that  every  reasonable  demand  has  been  promptly 
attended  to.     Efficient  work  in  this  regard  both  makes  and  keeps 


iB>"»°"' 


ACCOUNTING    SYSTEM 


253 


!OOK. 

usiness  upon 
3.1  interest  in 
in  their  good 
ed  as  a  Com- 
dinary  blank 
;ry  much  as  a 
the  event  of 
sons  they  are 

•  through  the 
le  form  of  an 
her  employe, 
entry  to  that 
irmation  that 
vhatsoever  in 
)wledge  of  an 
i  in  this  book. 
>f  a  vast  fund 
business,  and 
pected  by  the 
at  the  drift  of 
er  is  wrong  in 
shment,  and, 
een  promptly 
kes  and  keeps 


friends  After  a  complaint  has  been  investigated,  the  facts  ascer- 
tained and  the  matter  disposed  of.  an  entry  to  this  effect  should 
be  made  below  or  across  the  complaint  over  the  initials  or  name  of 
the  person  who  has  given  it  special  attention. 

The  information  that  may  be  recorded  in  a  book  of  this  knid 
includes  the  various  statements  that  are  made  from  time  to  time 
by  customers  who  call  at  the  ofifice,  of  reasons  for  not  paymg  at  a 
certain  date  or  promises  to  pay  at  some  future  date.     Information 
of  this  kind  should  at  once  be  brought  to  the  knowledge  of  the 
collectors,  so  that  they  may  act  accordingly.     If  a  systematic 
record  of  these  statements  is  kept,  with  proper  memorandums 
transferred  from  time  to  time  to  the  f^le  of  pay  cards,  or  otherwise 
brought  to  the  attention  of  collectors,  the  effect  will  be  to  hold 
customers  to  the  letter  of  their  promises,  thereby  greatly  facilitat- 
ing collections.     Other  items  of  information  to  be  recorded  in- 
clude all  the  facts  picked  up  by  truckmen  and  other  employe^  con- 
cerning the  customers  of  the  establishment,  their  removals  and 
their  circumstances  in  general.     In  short,  the  Complaint  and  In- 
formation Book  is  a  general  "blotter,"  receiving  everything  that  is 
offered,  and  from  which  the  different  items  bearing  upon  the  con- 
duct of  the  business  .are  culled  and  posted  to  the  records  appro- 
priate thereto. 


J 


»st!4;s.»*i«*w,«i^5Sfeb 


CHANGE    OF    ADDRESS    BOOK 

A  systematic  record  of  the  changes  of  addresses  of  customers 
is  a  prime  requisite  in  every  establishment  doing  an  instalment  or 
credit  business.  V^/hen  it  is  recalled  that  a  very  moderate  busi- 
ness in  this  line  will  have  as  many  as  three  or  four  thousand  ac- 
counts, and  that  stores  of  the  average  size  will  have  perhaps 
twice  as  many,  while  numerous  establishments  are  to  be  found 
with  from  twenty  thousand  to  fifty  thousand  accounts  each,  the 
importance  of  a  definite  Change  of  Address  System  becomes  ap- 
parent. The  outside  men  of  the  establishment,  including  col- 
lectors and  tracers,  are  the  ones  who  are  specially  able  to  report 
changes,  but  unless  these  changes  are  systematically  recorded  in 
the  ofifice  when  reported,  what  the  outside  men  have  done  is  of  no 
particular  advantage. 

The  book  provided  for  change  of  addresses  by  the  Self-Prov- 
ing Account  Book  Company  is  arranged  upon  a  plan  that  has  been 
found  very  advantageous  in  actual  use.  It  is  ruled  with  a  date 
column  on  the  left,  then  with  a  space  for  the  name,  following 
which  is  a  space  for  the  old  address  and  then  a  space  for  the  new 
address.  There  is  also  a  column  for  a  check  mark,  or,  preferably, 
the  clerk's  initials  in  posting  the  change  of  address  to  the  custo- 
mer's pay  card  or  the  collector's  book,  and  another  for  recording 
the  posting  of  the  change  to  the  name  index,  and  still  a  third  for 
posting  to  the  street  directory,  if  the  latter  book  is  maintained. 
Collectors,  bookkeepers,  clerks,  salesmen,  delivery  men,  and  all 
others  connected  with  the  establishment,  should  be  urged  to 


ACCOUNTING    SYSTEM 


866^ 


oi  customers 
istalment  or 
•derate  busi- 
housancl  ac- 
ave  perhaps 
to  be  found 
Its  each,  the 
becomes  ap- 
cluding  col- 
Die  to  report 
recorded  in 
done  is  of  no 

le  Self-Prov- 
that  has  been 
with  a  date 
le,  following 
:  for  the  new 
r,  preferably, 
;o  the  custo- 
or  recording 
ill  a  third  for 
1  maintained, 
men,  and  all 
be  urged  to 


svstematically  report  to  the  clerk  in  charge  of  th,s  book  e^er3. 

change  of  address  which  comes  to  their  knowledge;  and  m  turn. 

the  clerk  in  charge  should  be  held  for  proper  postn.gs  to  the 

other  records  as  above  mentioned. 

The  postings  from  this  book,  which  in  itself  the  bookkeeper 

would  regard  merely  as  a  journal,  or  posting  medium,  should  be 
made  as  regularly  and  as  systematically  as  are,  for  example,  the 
postings  of  amounts  from  the  Sales  Record  to  the  cus  ome  s 
account.  Any  laxity  or  carelessness  in  this  regard  .  fatal  to  he 
system.     Surely  it  is  little  comfort  to  the  merchant  to  find  that 


some  time  or  other  he  has  lost  an  account  simply  by  reason  of  the 
carelessness  or  the  negligence  of  some  one  in  his  ofifice.  Many 
losses  occur  simply  because  of  the  neglect  of  some  one  in  matters 

of  this  kind. 

In  some  well  conducted  establishments  the  Change  of  Ad- 
dress book  is  kept  in  a  prominent  place  in  the  office,  accessible  to 
eyery  collector  and  delivery  man,  and  to  other  employes  of  the 
establishment,  and  the  rule  is  made  that  every  one  who  knows 
of  a  change  of  address  shall  record  the  same  in  the  book  as  soon 
as  the  fact  comes  to  his  knowledge.  By  this  plan  the  entries  in 
the  change  of  address  book  are  in  the  handwriting  of  the  per- 
sons getting  the  information,  and.  with  the  date,  it  shows  at 


256 


THE    SELF-FROVING 


what  time  the  information  was  reported  to  the  office.  In  turn, 
as  use  is  made  of  this  information,  or  as  lack  of  information  con- 
cerning an  address  is  discovered,  there  is  opportunity  to  give 
proper  credit  to  the  one  who  has  supplied  it,  or  fixing  the  re- 
sponsibility upon  the  one  -who  has  failed  to  report  a  change  of 
which  he  was  cognizant,  as  the  case  may  be.  The  larger  num- 
ber of  entries,  of  course,  would  in  this  case  be  in  the  handwriting 
of  the  collectors,  because  they,  of  all  connected  with  the  estab- 
lishment, are  most  likely  to  encounter  facts  concerning  changes 
of  address. 

It  sometimes  happens  that  it  is  known  that  a  certain  cus- 
tomer has  left  a  recorded  address,  but  the  new  address  has  not 
yet  been  ascertained.  Such  facts  may  be  distinguished  from 
others  by  having  the  entries  made  in  red  ink.  Red  ink  on  the 
Change  of  Address  book,  therefore,  would  be  in  effect  a  danger 
signal,  and  would  call  the  attention  of  every  one  in  the  store  and 
office  to  the  fact  that  the  address  of  a  customer  who  has  de- 
parted, leaving  no  record  behind  him,  is  needed.  Every  one, 
therefore,  would  be  stimulated  to  do  his  best  to  ascertain  the  new 
address  and  to  complete  the  record  in  his  own  handwriting. 

Referring  again  to  the  form  of  the  Change  of  Address  book 
presented  herewith,  it  will  be  seen  that  it  is  not  absolutely  neces- 
sary that  the  red  ink  plan  be  resorted  to,  because  the  lack  of  par- 
ticulars in  the  new  address  column  would  in  itself  be  sufficient 
notice  to  all  who  have  occasion  to  refer  to  the  book  that  ad- 
ditional information  is  required. 

However  the  book  is  arranged  and  managed,  there  should  be 
special  eflforts  made  to  impress  upon  all  employes  of  the  estab- 
lishment the  necessity  of  maintaining  it  up  to  date,  and  the 
burden  of  responsibility  should  be  made  to  rest  especially  heavy 
upon  the  collectors,  delivery  men  and  other  outside  employe?  of 
the  concern. 


In  turn, 
ion  con- 
to  give 
:  the  re- 
lange  of 
[er  nuni- 
d  writing 
le  estab- 
changes 

tain  cus- 
has  not 
led  from 
i  on  the 
a  danger 
itore  and 
has  de- 
ery  one, 
1  the  new 

ess  book 
\y  neces- 
k  of  par- 
sufficient 
that  ad- 

ihould  be 
he  estab- 
and  the 
lly  heavy 
ploye?  of 


STREET    DIRECTORY    OF    CUSTOMERS 

It  is  to  the  advantage  of  every  credit  merchant  or  instahnent 
dealer,  particularly  in  the  furniture  business  and  doing  a  large 
trade,  to  be  able  to  designate  on  call  the  houses  in  the  town  or  city 
which  contain  goods  in  which  he  is  interested,  upon  the  basis  of 
lease,  contract  sale  or  upon  chattel  mortgage.  Second-hand  deal- 
ers are  loath  to  buy  goods,  the  title  to  which  is  in  the  least  clouded, 
and,  with  a  wisdom  begotten  of  experience,  it  is  their  habit  where 
goods  are  offered  them  to  inquire,  so  far  as  they  have  the  oppor- 
tunity, whether  they  are  in  any  way  covered  by  mortgage  or  con- 
tract. In  seeking  this  information  it  is  not  unusual  for  them  to  ap- 
proach the  instalment  merchant  with  specific  questions.  The  in- 
stalment merchant  in  turn  very  readily  gives  the  information  de- 
sired and  cordially  invites  the  second-hand  dealer  to  come  again, 
simply  because  exchanges  of  information  are  greatly  to  his  advan- 
tage, frequently  giving- him  timely  information  of  what  dishonest 
customers  are  trying  to  do. 

Another  class  of  people  who  are  interested  in  information  of 
this  kind  are  those  who  make  a  business  of  lending  money  on  chat- 
tel moragages,  or  upon  the  basis  of  a  bill  of  sale  on  furniture  and 
household  effects.  For  reasons  already  explained  people  in  this 
line  of  business  want  to  know  positively  in  whose  name  is  the  title 
of  the  goods  in  question,  and  for  reasons  above  eStplained  they  also 
are  frequently  willing  to  call  upon  the  instalment  dealer  for  the 
purpose  of  asking  whether  or  not  he  has  goods  in  such  and  such  a 
building,  on  such  and  such  a  street.    The  name  that  has  been  given 


J 


m^m^se 


2j.g  THE    SELF-niOVlXG 

to  the  money  lender  or  to  the  dealer  in  second-hand  goods  is  very 
frecuently  different  from  that  known  to  the  merchant,  and  there- 
for the  only  form  of  record  which  would  n.eet  requirements  ts  of 
the  nature  of  a  street  or  buildin,  index,  so  marked  as  to  mdtcate 
that  goods  belonging  to  the  merchant  directly  or  md.rectly  are  lo- 

cated  therein.  , 

Different  plam  are  in  use  of  records  of  th,s  k,nd.  several  o( 
„hicl,  will  be  described.  Eacl,  plan  outlined  is  best  for  some  par- 
.icular  place.  It  is  impossible  to  specify  which  is  best  to  use  .n  a 
given  instance  without  knowing  in  advance  various  -"<""°-  -j 
drcumstances.  Sometimes  the  street  and  house  mdex  can  be  ba  ^ 
upon  a  map.  and  in  other  cases  it  is  based  upon  an  abstract  of  the 
street  directory  in  the  official  publication  of  the  town. 

Where  maps  drawn  to  a  very  large  scale  can  be  read.ly  ob- 
tained showing  each  individual  house  to  such  dimens.ons  as  would 
"rm^  sticking  into  the  same  a  pin  or  tag  a  plan  a„a,ogot,s  to  the 
routing  system  used  by  large  mercantile  houses  .s  a-dable.    The 
m  p  is  subdivided  into  sections  of  proper  dimens,ons  to  fit  the 
Taw    s  of  a  commercial  routing  cabinet.    The  div>s,o„s  may  be 
;  Jr   pect  to  wards,  or  to  general  locaUties.  according  to  the  d.. 
r  tion  li  the  managing  man.  A  very  good  plan  ,s  to  su  d..,     «, 
map  with  respect  to  collectors'  routes  or  d,stncts.    By  whatever 
In  Z  map  is  subdivided  each  of  the  several  sections  .s  mounted 
Ta  dr-er  and  the  cabinet  containing  all  is  placed  m  a  convement 
po!i  ,on  in  the  office.  A  series  of  tags  with  pin  pomts  .s  prov.ded 
eithe  all  of  one  color  where  the  sales  are  upon  a  smgle  plan,  or  of 
It ral  colors  where  several  plans  of  selling  are  employed.  Each 
tag"  a  ge  enough  to  receive  upon  its  face  a  sales  number  and  on 
Z   ack  a  designation  of  the  street  and  number  to  wh.ch  tt  .s   e. 
-oted    Whenever  a  sale  is  made  in  the  estabhshment  and  at  the 
rite  the  ledger  account  is  opened,  one  of  these  tags  .s  filled  out. 
::;  d  on  L  face  with  the  sales  number  or  ledger  number  or 


tw^^wi'itni'il^iM'^*'**^'^"""^- 


Is  is  very 
ul  there- 
ents  is  of 
I  indicate 
Iv  are  lo- 


several  of 
ionie  par- 

0  use  in  a 
itions  and 

1  be  based 
•act  of  the 

eadily  ob- 
s  as  would 
;ous  to  the 
able.    The 
to  fit  the 
>ns  may  be 
;  to  the  dis- 
bdivide  the 
y  whatever 
is  mounted 
convenient 
is  provided, 
;  plan,  or  of 
ayed.   Each 
nber  and  on 
lich  it  is  de- 
,  and  at  the 
is  filled  out, 
•  number  or 


j|iinif!|M|ili'iir 


ACCOUNTING    SYSTEM 


250 


both,  as  preferences  may  be,  and  on  the  back,  in  the  briefest  possi- 
ble manner,  with  an  indication  of  the  street  and  number  for  which 
it  stands.  This  tag  is  then  taken  to  the  drawer  containing  the  map 
that  shows  the  street  and  house  and  it  is  properly  stuck  in  place.  It 
thereafter  stands  as  the  record  of  the  fact  that  there  are  goods  in 
the  house  indicated  in  which  the  merchant  has  an  interest  of  the 
nature  indicated  by  the  color  of  the  tag. 

When  a  money  lender  or  dealer  in  second-hand  goods  ap- 
proaches the  merchant  with  an  inquiry  if  he  has  goods  in  a  certain 
house  a  glance  at  the  drawer  of  the  cabinet,  revealing  the  presence 
or  absence  of  a  tag,  is  sufificient  to  determine  the  answer.  Again,  if 
a  salesman  or  driver  or  other  employe  of  the  estabhshment,  no- 
tices that  goods  are  being  removed  from  a  certain  building  and  has 
a  suspicion  that  the  merchant  is  interested  in  goods  located  at  that 
number,  a  glance  at  the  drawer  also  gives  the  facts  of  the  case  and 
most  satisfactorily  answers  numerous  questions  which  would  oth- 
erwise arise  in  the  office  preparatory  to  taking  such  steps  as  are 
necessary  to  protect  the  merchant's  interest. 

Where  the  cabinet  of  maps  is  not  resorted  to  a  plan  that  is 
found  to  answer  an  excellent  purpose  is  that  of  recording  in  a 
book  appropriated  for  the  purpose  the  numbers  seriatim  on  the 
different  streets  making  up  the  inhabited  portions  of  the  city. 
There  is  first  put  down  the  name  of  the  street  and  then  on  the  left 
hand  of  the  page  the  numbers  on  one  side  of  the  street  and  on  the 
right  hand  page  the  numbers  on  the  other  side  of  the  street.  The 
book  used  should  be  wide  enough  to  allow  ample  space  for  writing 
names  opposite  each  of  these  numbers  v«thout  any  conflict  in  the 
middle  of  the  page.  A  good  plan  is  to  rule  a  Hne  down  the  centre  of 
the  page,  keeping  the  entries  to  the  right  and  left  of  it,  as  the  case 
may  be.  As  goods  are  sent  out  on  lease  or  mortgage  to  a  house  in 
any  street  this  directory  book  is  opened  and  the  name  of  the  cus- 
tomer, with  date  and  number  of  order,  is  recorded  opposite  the 


_^  THE  aEi.rruoviNO 

house  in  wWch  he  resides.  In  .he  case  of  removal  a  red  ink  line  is 
drawn  .hrongh  .he  name  and  „nden,ea.h.  in  red  n,k  ,s  wru  en 
^Reived  .o  ••  following  wi.h  .he  new  s.ree.  and  nnmber.  Then 
afrains.  .he  new  nnmber;  on  whatever  s.ree.  ,.  may  he  loca.ed. 
an  en.ry  is  made,  the  same  as  in  the  original  case. 

A  rigid  enforcemen.  of  this  rnle  of  indexmg  the  location  of 
eoods  dis  no.  cos.  much  in  office  sys.em  and  .he  expense  n- 
volvtd  sTifiing  indeed  as  compared  wi.h  .he  informa.ton  .ha.  .s 
,  r  V  f  rnished  and  .he  hearing  that  .t  has  npon  the  c,.nck  U.n 
lich  a  merchant  is  sometimes  rec,„ired  to  make  to  P™tect  ns  - 
,„ests.  Manifestly,  the  work  of  indexing  cannot  be  done  by  any 
one  else  than  a  person  entirely  familU  ■  with  the  town  to  wh.ch  the 

nrlreme  of  street  directory  for  indexing  the  location  o, 
goods  above  described  is  hardly  applicable  wi.hon.  ".<>«--;" 
L  large  ci.ies  where  fla.s  and  apar.tnent  houses  preva  1.  from  the 
^.  t  so  .any  lots  of  goods  are  possible  to  be  located  a  a  g.  n 
number  There  are  sc-n,-  baildings  in  .he  larges.  c,..e»,  for  exam 
r'h  .  have  as  n.any  as  fifty  sui.es  of  rooms  or  apar.men.s  for 
a    s   racically  a  single  number  on  .he  s.reet.  Under  the.  con 

Tu    rlrder  to  overcome  upon  the  -P  P'-,  pe-J^P^.  «  » 
upon  .he  s.ree.  directory  scheme  last  outhned.    n  «'-  '^'^^  " 
where  it  is  known  that  a  certain  mtmber  refers  to  a  fiat  or  apart 
Thou  e  several  lines  or  spaces  in  the  arrangement  of  the  book 
r  l  p:::idrthns  affording  the  chance  to  record  a  number  of 
customers  opposite  the  one  number.  ^.  .  ,,  .  ,h. 

Still  ano.her  plan  of  s.reet  and  house  indexmg  wh.ch  has  .h. 
appro  al  of  cer.ain  merchants  and  office  men  ut.h.es  the  .onv  n 
Xnalcard  index  for  the  record.  The  colored  d.v.s,on  cards  m  the 
ndex  s  and  for  .he  streets  and  are  wri..en  up  from  the  hs.  of 


nk  line  is 
s  written 
ler.  Then 
e  located, 

3cation  of 
cpense  in- 
lon  that  is 
luick  turn 
tect  his  in- 
)ne  by  any 
I  which  the 

location  of 
lification  in 
il,  from  the 
d  at  a  given 
1,  for  exam- 
rtments  for 
r  these  con- 
cr  to  the  cir- 

referred  to 
jrhaps,  than 
z  latter  case, 
lat  or  apart- 
t  of  the  book 

a  number  of 


ACCOrNTINO    SYSTm  fl 

streets  published  in  the  street  directory.  Thew      >«ion  ear  »  are 
usually  a  little  wider  than  the  regular  cards  in  the  '  ra>     F.:kI  nl  the 
regular  or  subordinate  cards  coming  between  these  divisions  bears 
a  number  representing  a  lot  or  building.  Whenever  a  sale  is  made 
the  card  representing  the  building  to  which  the  goods  are  dehv- 
ered  is  withdrawn  from  the  tray,  and  thereon  is  recorded  the  name 
of  the  customer,  the  number  of  the  sale,  the  ledger  number  and 
such  other  particulars  as  may  be  desired.  The  card  is  duly  replaced 
and  is  then  ready  for  reference  whenever  any  information  concern- 
ing that  street  and  number  is  demanded.  Where  there  are  several 
apartments  or  flats  at  a  certain  number  this  fact  is  recorded  upon 
the  card  corresponding  to  the  number,  with  proper  reference  to 
cards  immediatelv  following.  Each  of  these  bears  a  sub-head  refer- 
ring  to  the  first  card  and  is  devoted  to  one  particular  flat  or  apart- 
ment and  in  turn  carries  the  same  general  record  as  described 
above. 


vhich  has  the 
5  the  ponven- 
n  cards  in  the 
m  the  list  of 


^^ 


imi 


,       .l! 


REPAIRING    AND    JOBBING 

In  connection  with  every  merchandising  business,  whether 
in  the  furniture  Hne  or  in  some  other  branch  of  trade,  there  is 
very  often  encountered  the  necessity  of  maintaining  a  repair  or 
jobbing  department.     A  customer  wishes  an  article  of  furniture, 
for  example,  repaired,  and  naturally  turns  to  the  merchant  from 
whom  it  was  purchased  for  the  necessary  work,  f^rst,  because  the 
merchant  has  a  special  interest  in  the  goods,  assuming  that  the 
sale  has  been  made  upon  lease  or  contract  conditions,  and,  sec- 
ond, because  it  is  to  be  supposed  that  the  customer  is  better  ac- 
quainted with  the  merchant  from  whom  he  made  the  purchase 
than  with  anv  other.     It  is  to  the  interest  of  the  dealer  always  to 
tender  facilities  in  this  regard,  merely  for  the  purpose  of  conserv- 

ing  his  general  trade. 

The  repairing  of  a  customer's   goods  demands  a  certain 
amount  of  new  material  and  consumes  a  certain  amount  of  labor 
There  may  also  be  involved  the  item  of  cartage,  in  the  sense  of 
sending  for  the  article  and  returning  it.     So  much  for  the  de- 
scription of  the  cost  items  of  one  class  of  transactions  which  may 
arise,  and  which  should  be  treated  as  follows:-The  customer  is  to 
be  debited  with  a  fair  charge  for  the  work  done  and  service  ren- 
dered, which  is  either  charged  in  account  or  is  collected  for  at  the 
time      If  such  transactions  are  numerous  a  special  Repairing  and 
Jobbing  Account  should  be  opened  to  receive  the  credit  for  the 
charge.     This  account,  in  turn,  is  to  be  debited  with  the  exact 
cost,  whether  materials  or  labor,  or  both,  as  the  case  may  be. 


ACCOINTINO    KY8TEM 


::*ut 


s,  whether 
le,  there  is 
a  repair  or 
-{  furniture, 
chant  from 
because  the 
ng  that  the 
IS,  and,  sec- 
s  better  ac- 
he purchase 
er  ahvays  to 
;  of  conserv- 

Is  a  certain 
unt  of  labor, 
the  sense  of 
1  for  the  de- 
ls which  may 
ustomer  is  to 
1  service  ren- 
ted for  at  the 
lepairing  and 
credit  for  the 
ith  the  exact 
case  may  be. 


Thci  the  bahuK-e  in  this  account  will  show  the  proht  or  loss,  as 
the  case  n.av  be.  following  upon  such  work,  and  is  to  bo  closed 
fron,  time  to  time  into  the  regular  Loss  and  Cain  Account  of  the 
business.  That  is  to  say,  it  is  to  be  con.lucted  precisely  as  a  man- 
ufacturing .lepartment,  which  is  more  fully  .Icscribed  in  another 

portion  of  this  volume. 

Where  the  repairing  is  only  an  occasional  item,  and  the 
volu,ne  of  the  business  does  not  warrant  a  special  account    as 
above  described,  the  entries  may  be  managed  through  some  o  the 
expense  accounts  of  the  business,  always  choosing  that  which  by 
its  nature  is  most  nearly  related  to  the  work  done.     The  expense 
account,  whatever  may  be  its  name,  stands  the  cost  and  also  re- 
ceives  the  credits.     The  profit  in  the  transaction  m  this  case 
serves  simply  to  reduce  the  general  volume  of  expense  repre- 
sented bv  the  account  through  which  the  transaction  has  passed. 
Still  another  plan  is  available.     By  the  use  of  a  Repatrmg 
and  Jobbing  Record,  which  shows  the  cost  of  each  transaction 
and  also  shows  the  price  at  which  the  service  is  charged,  the  re- 
pairing and  jobbing  may  be  run  through  the  Selling  Account        n 
this  case  Selling  Account  is  to  be  debited  with  the  cost  of  the 
work,  labor,  materials,  etc.,  with  proper  credit  to  Buying  Account 
for  the  materials  consumed  and  to  the  other  accounts  for  the 
labor  and  other  items  involved.       In  turn.  Selling  Account  re- 
ceives credit  for  the  amount  charged  for  the  service,  and  the  gam 
(or  loss)  passes  through  the  regular  channels,  as  heretofore  de- 

''"'^The  second  class  of  requirements  that  devolves  upon  the  re- 
pairing and  jobbing  department  of  a  store  are  those  which  arise 
I  the  repair  of  goods  damaged  in  transit  and.in  the  alterations  m 
goods  which  are  sometimes  made  to  please  customers.     Repair 
Lt  are  made  to  goods  in  transit,  in  the  sense  o  -placmg  J^a 
has  been  lost  or  damaged,  are,  of  course,  chargeable  either  to  the 


P 

m 


2U 


THE    SELF-PROVING 


rn 


(    '.■;< 


transportation  company  or  to  the  shipper,  according  to  the  terms 
upon  which  the  purchase  was  made  or  the  transportation  of  the 
goods  undertaken.  In  some  cases  the  repairs  may  be  at  the 
cost  of  the  merchant.  However  this  may  be,  a  record  of  the  cost 
of  each  individual  job  must  be  kept  and  the  item  charged  to  ihe 
proper  person  or  account.  This  will  be  the  manufacturing  com- 
pany supplying  the  goods  or  the  transportation  company,  if  the 
cost  properly  belongs  to  them.  It  will  be  Buying  Account  if 
the  cost  properly  belongs  to  the  merchant.  In  each  case  there 
must  be  the  credit  to  the  proper  expense  account,  in  case  that 
plan  is  employed  for  managing  such  transactions,  or  to  Repairing 
and  Jobbing  Account,  in  case  a  special  account  for  such  transac- 
tions has  been  opened  up,  as  above  suggested. 

In  the  case  of  alterations  of  goods  to  meet  the  requirements 
of  customers,  the  cost  of  the  alteration  necessarily  becomes  a 
part  of  the  cost  of  the  goods,  in  which  case  the  charge  is,  of 
course,  made  direct  to  Buying  Account,  with  proper  credit  to  the 
expense  account,  or  to  the  account  with  Repairing  and  Jobbing, 
in  case  a  regular  department  for  this  purpose  is  organized. 

The  one  thing  to  guard  against,  and  the  one  mistake  very 
commonly  made  by  inexperienced  managers  in  matters  of  this 
kind,  is  making  the  repairs  or  the  alterations,  as  the  case  may  be, 
and  taking  no  account  of  them  whatsoever.  The  result  of  this 
is  that  the  concern,  as  a  whole,  stands  an  expense  without  the 
expense  being  specifically  charged  to  the  department  or  account 
to  which  it  rightfully  belongs,  and  without  the  proper  contra  ac- 
count getting  its  credit.  Good  accounting  and  proper  adminis- 
tration of  the  business  demand  that  no  repairing  shall  be  done 
without,  first,  a  record  of  cost;  second,  a  proper  charge  for  the 
work  done,  and,  third,  a  proper  credit  to  the  account  devbted  to 
such  transactions.  It  is  not  enough,  in  a  case  of  repairs  in  the  in- 
terest of  a  customer,  that  the  customer  is  charged  and  that  the 


the  terms 
on  of  the 
be  at  the 
A  the  cost 
jed  to  Lhe 
ring  com- 
my,  if  the 
Account  if 
case  there 
I  case  that 
Repairing 
:h  transac- 

quirements 
becomes  a 
large  is,  of 
redit  to  the 
id  Jobbing, 
lized. 

listake  very 
ters  of  this 
;ase  may  be, 
jsult  of  this 
without  the 
t  or  account 
:r  contra  ac- 
per  adminis- 
hall  be  done 
large  for  the 
t  devbted  to 
lirs  in  the  in- 
and  that  the 


ACCOUNTING    SYSTEM 

cre.lit  goes  somewhere-for  example,  to  Selling  Aceoun..     The 
elstcnfer  should  be  eharged,  and  at  .he  same  ..me  .he  cred,. 
should  go  .o  .he  aceoun.  .o  which,  upon  .he  scheme  of  class.fica- 
ion  .hf.  is  a.  .he  ou.se.  decided  upon  by  .he  estabhshmen.,  ,. 
belongs.    Nor  is  it  sufficien.  in  .he  case  of  repairs  .o  goods  m 
s.ock.ha.  .he  work  is  done  and  .he  labor  paid.    The  proper  ac- 
eoun., in  .his  case  Buying,  mus.  be  charged  wi.h  .he  cc..  and  .he 
contra  aceoun.  credi.ed.    The  en.ries  be.ween  .he  d.fferen,  ac- 
coun.s  in  the  books  affected  by  such  a  transacfon  should  be  as 
carefully  and  correctly  made  as  would  be  the  case  between  md.- 
viduals.    Upon  the  thorough  administration,  in  th,s  regard,  of 
the  system  adopted  depends  the  accuracy  of  the  results  shown 
from  lime  to  time  in  the  way  of  profit  or  loss. 


gjtutim 


SEWING    AND    LAYING    CARPET 

In  instalment  stores  doing  a  moderate  business  the  sewing 
and  laving  of  carpets,  maVng  and  hanging  of  draperies,  curtains, 
window  shades,  etc.,  is  scarcely  of  sufficient  importance  to  war- 
rant the  name  of  a  manufacturing  department.     It  is  expedient, 
therefore,  to  regard  this  work  as  a  part  of  the  regular  Selling  Ac- 
count, keeping  upon  the  order  slips  and  requisitions  for  material 
the  cost  of  labor  and  all  other  items,  in  such  a  way  as  to  give  the 
proper  accounts  credit  for  what  they  supply.     By  this  plan  the 
total  costs  go  into  Buying  Account,  and  Selling  Account  gets  the 
credit  being  first  debited  with  the  costs  from  Buying  Account  as 
the  items  are  charged.    The  balance  in  Selling  Account  would 
then  show  the  gross  profit  on  transactions  of  this  class  as  well  as 

on  others. 

These  conditions  prevail  whether  the  sewing  and  laying  is  a 
matter  of  a  specific  charge  or  lumped  into  the  price  of  the  carpet 
laid.  Whatever  in  the  way  of  labor  and  materials  is  expended  in 
this  regard  is  an  additional  cost  of  the  merchandise  sold,  and  must 
be  properly  recorded.  The  records  are  to  be  kept  in  such  a  way 
as  will  conform  with  the  underlying  principle  here  explained,  and 
show  at  all  times  in  the  balance  of  Selling  Account  the  gross  profit 
made  on  the  transactions. 

For  all  such  purposes  as  sewing  and  laying  carpets,  making 
and  hanging  draperies,  making  and  putting  up  window  shades 
etc    an  adequate  system  should  be  provided  that  not  only  will 
take  care  of  the  materials  consumed,  but  also  the  labor,  m  a  way 


C 


he  sewing 
i,  curtains, 
ce  to  war- 
expedient, 
Selling  Ac- 
Dr  material 
to  give  the 
is  plan  the 
,nt  gets  the 
Account  as 
Dunt  would 
IS  as  well  as 

I  laying  is  a 
{  the  carpet 
expended  in 
Id,  and  must 
such  a  way 
plained,  and 
;  gross  profit 

jets,  making 
idow  shades, 
lot  only  will 
bor,  in  a  way 


ACCOUNTING    SYSTEM 


m 


to  keep  the  office  at  all  times  informed  of  what  is  being  done,  and 
ultimately  what  is  to  be  paid.  We  present  in  this  connection  a 
tag  system  that  has  been  found  to  work  very  satisfactorily  in  car- 
pet work.  Something  similar,  properly  adapted  to  the  require- 
ments, would  work  equally  well  in  other  directions. 

An  ordinary  shipping  tag  is  used  and  is  so  printed  with 
"raised  leaders"  between  the  sections  as  to  readily  separate  into 


(2) 
'"""  J.  I  nm » CO. 

Carpeto,Oaoloth  I  Pnrniture 
•^     » 1 1  gym  w.  i*H 


No 873-.- 


TilllaMill 

uklH  MttUatat. 


Xo. 


873 


I'd*  $ewta  by 


.873.. 


.  M»  CnrpH  deHrtrta  t» 


Lgcifnlty 
lalilbr 
Ordtr  Mo- 


FACSIMILE  OF  COUPON  TAG  FOR  KEEPING  TRACK  OF  CARPET  WORK 

four  parts,  as  indicated  by  the  reduced  fac-simile  presented  here- 
with The  entire  tag.  bearing  the  name  and  address  of  the  cus- 
tomer in  the  upper  section,  with  notation  of  the  number  of  yards, 
is  attached  to  the  roll  of  carpet.  The  lower  part,  or  first  coupon, 
carries  the  sales  number  and  is  the  office  record  of  the  persons  to 
whom  have  been  entrusted  the  sewing  and  the  laying.  It  also  car- 


;lt- 


208  THE    SELF-PROVING 

ries  the  serial  number  of  the  tag,  the  date,  the  number  of  yards  of 
carpet  and  the  point  to  which  the  carpet  is  to  be  deHvered.  The 
second  coupon  also  carries,  the  serial  number,  and  is  the  sewer^s 
voucher.  As  will  be  seen  by  the  conditions  printed  on  its  face,  it 
is  a  check  that  must  be  presented  at  the  office  when  demanding  a 
settlement.  The  third  coupon,  likewise  carrying  the  serial  num- 
ber, is  the  layer's  voucher,  and  must  also  be  presented  at  the  office 
by  the  layer  when  he  requests  a  settlement.  Each  of  these 
coupons,  it  will  be  noticed,  provides  space  for  the  signature  of 
the  persons  engaged. 


^  ii 


^!^ 


{ yards  of 
ed.  The 
le  sewer's 
ts  face,  it 
nanding  a 
:rial  num- 
the  office 
of  these 
mature  of 


OLD    LEASE    ACCOUNTS 


Merchants  who  have  been  conducting  an  instalment  business 
upon  some  other  system,  and  desire  at  a  certain  date  to  change 
from  the  old  plan  to  that  which  is  described  in  th.s  book  will  en- 
counter at  the  outset  the  problem  of  handling  the  old  leases. 
The  question  that  arises  is.  what  is  the  best  rule  to  follow  m 
handling  the  old  accounts  that  have  been  carried  along  m  the 
shape  of  leases?  In  many  cases  a  single  customer  has  several 
leases  in  operation,  with  balances  owing  on  all  of  them. 

It  is  advised  under  such  conditions  at  the  outset  to«roup 
these  various  balances  into  one  amount,  and  to  place  that  amoun 
against  the  customer's  name  in  a  single  ledger  accoun       Ihis 
done,  the  old  leases  are  left  in  operation,  so  far  as  the  cdlec  or 
work  is  concerned,  to  be  closed  up  in  the  usual  way.  ^^.th  all  the    . 
Iney  that  comes  to  hand  credited  in  the  ledger  -  the  -gula 
way,  against  the  consolidated  balance  there  recorded,  until  the 
last  balance  of  the  last  lease  has  been  discharged. 

The  several  numbers  of  the  old  leases  should  be  noted  on  he 
face  of  the  ledger  account,  in  such  a  way  as  to  facihtate  refer- 
Inces  from  the  new  records  to  the  old.  Similar  notations  shoved 
be  made  upon  the  leases  themselves.  As  one  after  another  of  the 
o^d  balances  are  discharged,  in  the  case  "f  --~^;/  ^ 
paying  under  several  leases,  the  numbers  will  be  checked  off.  so 
n^o  constantly  keep  the  bookkeeper  informed  of  the  progress 

^^  *';r;:n  may  be  expanded  stiU  further  and  the  consolidated 


'tBniMiBiwaiw«w«'>ii' 


■^u,.  iiliiiMMiirf'iiiniriiiiwTiiii 


270 


THE    SELF-PROVING 


balance  entered  upon  a  new  pay  card,  making  it,  so  far  as  the 
collection  department  is  concerned,  the  link  between  the  new 
and  the  old,  thus  enabling  the  collections  to  be  managed  alto- 
gether upon  the  new  plan,  so  far  as  records  are  concerned,  while 
keeping  constantly  before  the  collector  the  specified  terms  of  the 
old  leases  as  they  exist.  Shquld  a  customer  who  has  an  old  lease 
in  progress  want  more  goods,  then  it  will  be  necessary  to  transfer 
the  old  balance  to  the  new  pay  card,  with  the  new  charge  below  it. 
In  this  way  the  account  will  be  managed  under  one  head.  Slight 
modifications  of  the  plan  here  suggested  will  be  required  in  cer- 
tain cases,  but  the  principle  laid  down  will  be  found  to  work 
satisfactorily  for  all. 


ar  as  the 
the  new 
ged  alto- 
ed,  while 
ms  of  the 

old  lease 
0  transfer 
'.  below  it. 
I.  SHght 
ed  in  cer- 

to  work 


AUDITING    THE    BOOKS 

Comparatively  few  merchants  appreciate  the  advantage  of  a 
daily  audit  of  the  books  of  their  establishments,  either  personally 
or  at  the  hands  of  a  manager  or  superintendent.     Periodical 
audits  are  very  much  the  rule  at  the  present  time  with  large 
concerns  in  various  lines  of  business.  Professional  accountants  are 
frequently  called  in  for  purposes  of  this  kind,  and  there  is  on  such 
occasions  a  verv  thorough  overhauling  of  records  and  vouchers 
with  a  view  to  proving  the  accuracy  of  the  books  as  histories  of  the 
transactions  which  have  really  taken  place.    These  periodical  and 
professional  audits,  always  somewhat  expensive,  would  be  less 
needed  if  the  merchant  or  the  manager  of  the  business  followed  the    . 
plan  of  a  daily  audit  of  the  books. 

The  books  in  a  business  office  are  to  be  regarded  in  the  same 
light  as  the  log  of  a  ship,  and  they  ought  to  be  so  thoroughly  and 
honestly  conducted  that  there  would  never  be  any  question  as  to 
the  accuracy  of  the  record.    But,  continuing  the  comparison  of  a 
ship's  log,  where  is  the  captain  that  would  entrust  the  daily  entries 
in  the  log  to  one  of  the  crew  without  so  much  as  ever  supervising 
the  work  in  order  to  see  that  the  statements  entered  were  in  ac- 
cordance with  the  facts  of  the  case?    But  great  carelessness  in  this 
regard  prevails  in  the  bookkeeping  of  many  concerns  and  it  is  not 
infrequent  that  entries  are  made  in  the  books  which  are  incorrect 
in  themselves  or  of  a  character  to  be  better  left  out  entirely,  simply 
because  they  are  made  at  the  discretion  of  an  inexperienced  or  ill 
advised  bookkeeper  and  are  not  subject  to  the  immediate  super- 
vision of  the  managing  man  of  the  business. 

Aside  from  this  many  entries  of  expenses  ?.re  carelessly  made 
and  this  carelessness  continued  ultimately  leads  to  fraudulent  en- 


272 


THE    SELF-rROVING 


tries,  all  because  it  is  not  the  rule  that  all  entries  shall  be  thor- 
oughly supervised.  Carelessness  very  often  precedes  actual  dis- 
honesty, and  fraud  will  be  very  generally  avoided  by  such  a  rigid 
enforcement  of  system  as  will  overcome  the  tendency  of  careless- 
ness; hence  the  advice  to  merchants  and  their  tnanagers  that  every 
entry  in  the  books  of  an  establishment  should  be  audited,  checked 
or  approved,  using  whichever  term  is  preferred,  the  same  as  every 
invoice  and  voucher  is  similarly  audited  or  checked.  For  this  pur- 
pose, in  the  books  of  the  Self-Proving  Accounting  System  col- 
umns for  Auditor's  Check  are  provided  wherever  the  same  are 

likely  to  be  useful. 

The  plan  of  using  the  column  marked  Auditor's  Check  is  ex- 
tremely simple.  It  presupposes  a  regular  daily  examination  of  the 
work  of  the  clerk  upon  the  part  of  the  managing  man,  and,  as  evi- 
dence that  the  work  has  been  examined  and  approved,  his  initial  or 
some  other  mark  is  entered  opposite  each  entry.  Such  an  exami- 
nation regularly  attended  to  becomes  a  matter  of  routine  involv- 
ing far  less  labor  than  would  be  at  first  supposed. 

This  plan  has  the  advantage  of  holding  the  bookkeeper  or 
clerk  in  charge  strictly  to  his  lines  of  duty.  It  tends  to  keep  every- 
thing up  to  date  and  overcomes  the  danger  of  carelessness  pre- 
viously alluded  to,  but,  over  and  above  all  this,  it  keeps  perpetually 
before  the  business  man  or  the  manager  just  what  is  going  on  in 
the  establishment  in  a  way  to  make  him  intelUgent  in  all  his  direc- 
tions. It  results  in  system  upon  the  part  of  the  managing  man,  as 
well  as  system  upon  the  part  of  his  subordinates. 

The  daily  audit  of  details  in  the  manner  above  described, 
taken  together  with  an  examination  of  the  net  results  shown  by 
the  Private  Ledger  and  Balance  Sheet,  afford  an  assurance  of  an 
accuracy  in  the  records,  a  knowledge  of  the  actual  progress  of  the 
business  and  a  freedom  from  disagreeable  surprises  that  are  worth 
everything  to  the  business  man. 


I  ,-rtir"TiT>i'.t^ii^t»tu]Ma«i!''WJ'f-^'"-'S''' 


II  be  thor- 
actual  dis- 
ich  a  rigid 
jf  careless- 
that  every 
:d,  checked 
ne  as  every 
3r  this  pur- 
lystem  col- 
e  same  are 

;heck  is  ex- 
ation  of  the 
and,  as  evi- 
lis  initial  or 
li  an  exami- 
tine  involv- 

)kkeeper  or 
keep  every- 
essness  pre- 
perpetually 
going  on  in 
all  his  direc- 
ting man,  as 

e  described, 
ts  shown  by 
urance  of  an 
jgress  of  the 
at  are  worth 


MANAGING    THE    BANK    ACCOUNT 

Some  bookkeepers  maintain  a  regular  ledger  account  with  the 
bank,  debiting  deposits  and  crediting  withdrawals.     Others,  who 
pride  themselves  upon  their  progressiveness,  scout  this  idea  and 
maintain  that  the  only  account  with  the  bank  that  is  necessary 
is  that  afforded  by  the  stubs  of  the  check  book.     Still  other  ac- 
countants, who  consider  themselves  in  the  advance  line  of  pro- 
gressiveness, discard  the  conventional  check  book,  with  its  time 
honored  stubs,  and  use  checks  put  up  in  pad  or  tablet  form,  with 
a  check  and  deposit  register.    The  latter  has  columns  showing 
deposits  and  withdrawals,  and  is  provided  with  a  special  column 
for  balances.     None  of  these  plans,  however,  of  keeping  the  bank 
account  is  employed  in  the  Self-Proving  Accounting  System,  but 
instead  the  method  followed  possesses  features  of  all. 

Irrespective  of  the  way  the  bank  account  may  be  managed 
as  regards  the  cash  account  of  the  business,  the  merchant  or  his 
manager,  whenever  a  statement  of  conditons  is  wanted,  will  always 
demand  a  separation  as  between  the  cash  in  hand,  contained  in 
drawer  or  safe,  and  the  amount  in  bank,  subject  to  check.     Ac- 
cordingly, in  the  combined  Private  Ledger  and  Balance  Sheet, 
used  with  the  Self-Proving  Accounting  System,  separate  columns 
are  provided  for  these  items.     However  the  cash  record  may  be 
kept,  so  far  as  relates  to  daily  receipts  and  disbursements,  and 
however  the  bank  account  may  be  kept,  so  far  as  relates  to  de- 
posits and  withdrawals,  there  is  posted  to  the  Private  Ledger 
and  Balance  Sheet,  day  by  day,  the  aggregate  of  receipts  and 


wmmmmm^mi^- 


I 

I'' 
Bii'i' 


THE    SELF-PROVING 
814  , 

:rX .r^an Je\'r  In  .n.c.e  a.  a",  ..«  .He  con 
duTon  oUh.  cash  account  and  the  bank  account  r«p.ct.v.ly.    An 

X  "a  b  ..nc   cCumn  is  provided  to  receive  .he  figures  represen.- 
;t'>.e  .o.al  o.  these  balances,  .bus  giving  the  cash  resources  „. 

the  establishment  in  a  single  amount.  . 

A  few  »ords  of  advice  with  reference  to  the  management  of 

the  Ikaccount,  particularly  in  regard  to  records  of  depostts. 

laserupon  long    xperience.  will  no.  be  ou.  of  place  m  .h,s  con- 

n eCio       I.  i»  an  excellent  plan  to  make  out  deposU  shps  m 
plicate,  using  for  this  purpose  a  carbon  sheet.    Le.  .he^or,^n 

go  with  the  deposit  and  keep  the  duplicate  shp  for  reference 

"'"where  there  are  numerous  checks,  either  large  or  small  in 
amount,  .his  record  frequently  facilitates  .he  answer  .o  vartous 
Tstio^s  which  arise,  and  no  merchant  who  has  -Ployed  .hns 
In  any  length  of  time  would  consent  to  return  to  a  1«>  jy"»-"- 
"me  hod     The  duplica.e  deposit  slip  may  be  regarded  a.  .he 
Le  as  a  voucher,  or  a  record  of  a  cash  lUbursement,  andj 
U  may  be  put  in  .he  cash  drawer  .o  remtan  .here  unt.l  n  a 
the  end  of  the  day,  or  until  the  day's  .ransaoons  are  completed 

°"  '  WheTetveral  bank  acounts  are  maintained,  as  is  the  custom 
„ith  some  merchants,  some  of  the  extra  sets  of  ~  "™-  "'^ 
lich  the  Private  Ledger  and  Balance  Sheet  .s  P— ■  "^^^^^^^ 
utilised  for  maintaining  their  separate  records.    Or,  '  P™ 
all  .he  deposit  accounts  may  be  consolidated  m    .he  Prtva  e 
Lldger  under  one  head.    Question,  of  plan  in  this  regard  are  o 
be  settled  by  .he  preferences  of  the  mercham,  or  accoMmg  .o 
the  judgment  of  .he  managing  man. 


ig.j^jtMimri.iPiiwiW!i'i!  P  wff^'fi'' 


UJ.-i-"PJU""-'-H.  II    I  i-i    I  I  '  """• 


■  r^m^^f^^^^^' 


nd  checks 
3f  thePri- 
»s  the  con- 
ively.  An 
represent- 
esources  of 

igement  of 
){  deposits, 
in  this  con- 
>sit  slips  in 
the  original 
reference  if 

or  small  in 
r  to  various 
iployed  this 

less  system- 
arded  at  the 
nent,  and  as 
re  until  near 
re  completed 

is  the  custom 
;olumns  with 
nded,  may  be 
■,  if  preferred, 

the  Private 
regard  are  to 

accoi-ding  to 


BUYING   GOODS   AND    RECORDING   COSTS 

Enough  has  been  said  in  the  classification  of  accounts  pre- 
sented in  one  of  the  chapters  preceding,  and  also  in  our  discussion 
of  the  Merchandise  Account,  wherein  it  has  been  divided  into 
Manufacturing,  Buying  and  Selling  Accounts,  to  indicate  the  re- 
lationship that  the  purchases  of  the  establishment  sustain  to  the 
other  departments,  so  far  as  account  keeping  is  concerned.  So 
much,  however,  depends  upon  the  way  in  which  the  goods  are 
got  into  the  establishment,  ready  for  selling,  and  the  way  in  which 
costs  are  recorded  and  marked  upon  the  goods,  that  we  are  war- 
ranted in  still  further  impressing  upon  the  man  in  charge  the  ne- 
cessity  of  the  utmost  care  in  this  regard,  to  the  end  that  the 
records  shall  be  correctly  maintained. 

All  orders  which  are  given  for  goods  should  be  kept  in  dupli- 
cate, either  by  the  einployment  of  a  book  of  order  blanks  with 
stubs,  or  by  embodying  the  orders  in  a  letter  form  and  keeping 
the  duplicate  of  the  letter,  either  made  by  carbon  process  or  by 
press  copying.  This  rule  should  be  rigidly  observed,  whether  the 
orders  are  given  to  travelling  salesmen,  or  transmitted  by  mail  to 
the  manufacturer  or  wholesale  dealer.  The  prices  in  cases  where 
the  orders  are  given  upon  a  certain  stipulation  of  cost  should  be 
recited  in  the  order,  so  as  to  avoid  all  chance  of  mistake. 

On  receipt  of  the  invoice  from  the  manufacturer  or  wholesale 
dealer,  it  should  be  stamped  in  one  corner,  and  preferably  in  all 
cases  in  the  same  general  position  on  the  bill,  in  a  way  to  show  the 
date  the  invoice  is  received.  In  addition  the  stamp  should  provide 


276 


THE    SELF-PROVING 


M 


i'\rl 


spaces  for  recording  such  particulars  as  the  date  that  the  goods 
are  received,  checked  by,  extensions,  exanuned  by,  prices  checked 
by,  etc.;  notation  of  the  manager's  approval,  and  the  account  to 
which  the  amount  is  to  be  charged,  whether  Manufacturing  Ac- 
count or  some  subdivisions  of  Manufacturing  Account,  or  to  Buy- 
ing Account,  and  finally,  a  space  for  recording  the  place  of  the 
bookkeeper's  entry  of  the  invoice. 

The  manner  of  filing  the  invoices  is  a  matter  of  gr^at  im- 
portance. Whatever  may  be  the  plan  employed  it  should  be  suf- 
ficiently elastic  to  permit  of  instant  reference  to  any  required  in- 
voice at  any  time.  At  the  same  time  it  should  satisfactorily  pre- 
serve them  as  against  damage  or  loss.  The  old  plan  of  pasting  in 
bill  books  has  long  since  been  superseded,  and  the  plan  of  filing 
in  an  ordinary  letter  file,  which  was  in  vogue  some  time  since,  has 
also  given  way  to  the  better  plan  of  putting  the  invoices  away  in 
a  file  which  is  constructed  with  hinged  covers  and  posts  or  pillars 
between  the  covers  arranged  to  pass  through  the  paper,  and  with 
a  clamp  that  fastens  the  top  cover  to  the  pillars,  at  any  point,  thus 
(making  it  adjustable  as  required  for  the  addition  of  bills  or  in- 
voices at  any  time. 

One  of  the  uses  to  be  made  of  the  invoice,  in  addition  to  the 
checking  of  goods,  prices,  etc.,  already  referred  to,  is  that  of  fur- 
nishing prices  to  the  cost  book.  If  the  goods  in  the  establish- 
ment are  known  by  lot  numbers,  the  lot  numbers  should  be  en- 
tered upon  the  face  of  the  invoice  in  a  way  to  refer  to  the  cost 
book,  and  the  entry  in  the  cost  book  should  be  made  in  such  a 
way  as  to  refer  to  the  invoice,  thus  facilitating  cross  references 
for  all  purposes  whatsoever. 

Almost  every  merchant  has  his  own  peculiar  plan  for  mark- 
ing cost  prices  on  the  goods.  Sometimes  it  is  done  in  cipher  or 
in  cost  mark  figures  on  tags  which  apply  to  the  goods  as  they  are 
put  in  the  salesroom  or  warehouse,  and  sometimes  the  cost  prices 


:»a>*q^'3W.-«F»5*B=^      '   i.iiCiDijIlWVmiJ.  I.UIl.UllHH.i-liiJllI 


.»l'w>!  ■;4r>aiiy-'.m , 


m^m^iiiim&i'. 


ACCOUNTING    8YSTKM 


m 


the  goods 
es  checked 
account  to 
turing  Ac- 
er to  Buy- 
lace  of  the 

{  gr^at  im- 
3uld  be  suf- 
required  in- 
ictorily  pre- 
)f  pasting  in 
Ian  of  fiUng 
ne  since,  has 
ices  away  in 
sts  or  pillars 
)er,  and  with 
y  point,  thus 
»f  bills  or  in- 

Idition  to  the 
s  that  of  fur- 
the  establish- 
should  be  en- 
;r  to  the  cost 
ade  in  such  a 
OSS  references 

)lan  for  mark- 
le  in  cipher  or 
)ds  as  they  are 
the  cost  prices 


are  kept  in  the  Cost  Record  Book  alone,  with  only  the  reference 
numbers  upon  the  page.     In  any  event,  a  cost  record  book  is  de- 
sirable, and  also  such  a  system  of  references  from  tags  to  book  as 
will  facilitate  comparisons  whenever  the  same  arc  necessary.     I  he 
Cost  Record  Book  is  to  be  ruled  according  to  the  classes  of  goods 
which  are  handled,  with  columns  properly  headed,  and  in  this 
book  articles  or  lots  of  goods  are  to  be  entered  seriatim,  as  the 
invoices  are  received.    They  are.  as  already  mentioned,  to  be  des- 
ignated by  numbers.    In  the  main,  manufacturers'  design  numbers 
will  be  found  satisfactory  for  the  purpose  and  more  convenient 
for  use  than  new  numbers  established  upon  any  system  whatso- 
ever. 

The  particular  plan  of  recording  costs  and  marking  costs  that 
is  to  be  employed  depends  very  much  upon  the  chnracter  of  the 
goods  and  the  preference  of  the  managing  man.    Any  good  plan 
in  this  regard  will  answer  the  purpose,  so  far  as  the  Self-Proving 
Accounting  and  Business  /System  is  concerned,  provided  it  is 
rigorously  enforced  and  always  strictly  lived  up  to.  without  any 
lapses  or  variations.    The  requirements  may  be  briefly  stated  as 
follows:— The  cost  of  every  article  that  goes  into  stock  must  be 
recorded  in  such  a  way  that  when  the  article  is  sold  the  price  at 
which  it  was  charged  to  Buying  Account  can  be  readily  ascer- 
tained, so  as  to  be  used  in  giving  corresponding  credit  in  that  ac- 
count, and  in  properly  debiting  the  Selling  Account. 

The  basis  of  cost  at  whicii  goods  are  to  be  put  into  Buying 
Account  should  be  the  cost  of  the  goods  laid  down  in  the  store  or 
warehouse.  It  should  be  the  seller's  invoice  price,  with  freight 
and  cartage  added.  All  goods,  therefore,  are  to  be  charged  to 
Buying  Account  at  cost  as  shown  by  invoices,  with  the  expenses  of 
delivery  added.  The  actual  cost  of  the  individual  articles  is  to 
be  so  recorded  by  tagging  or  in  the  cost  book,  or  in  both  ways,  that 
whenever  the  article  is  sold  there  may  be  shown  on  the  Sales  Slip 


I 


'i 
ft) 


'I 


2^  THE    SELF-PBOVINQ 

its  cost  price  as  well  as  the  selling  price.  On  the  unvarying  and 
unceasing  maintenance  of  this  record  of  cost  for  both  the  debits 
and  credits  of  Buying  Account,  depends  the  accuracy  of  the  bal- 
ance in  Buying  Account,  as  representing  the  inventory  or  the 

value  of  goods  on  hand. 

In  making  the  application  of  the  foregoing  principles,  it  is  ad- 
vised that  every  article  of  merchandise  that  is  bought  to  be  sold 
again  be  tagged,  showing  in  addition  to  cost  price  and  selhng 
price  the  source  of  supply,  with  the  manufacturer's  designatmg 
number  and  direct  reference  to  the  invoice  or  other  record  of  pur- 
chase    Where  the  goods  or  articles  are  manufactured  by  the  con- 
cern itself,  corresponding  reference  should  be  made  to  the  slips 
or  invoices  which  accompany  the  goods  in  their  transfer  from 
Manufacturing  to  Buying  Account,  as  elsewhere  explained  in  this 
volume. 


ill 


arying  and 

the  debits 

of  the  bal- 

ory  or  the 

lies,  it  is  ad- 
t  to  be  sold 
and  selling 
designating 
cord  of  pur- 
t  by  the  con- 
to  the  slips 
ransfer  from 
lained  in  this 


RENT,    TELEPHONE,    TAXES,     &C. 
The  rent  of  a  store  or  warehouse  is  usually  payable  monthly, 
hut  Iccarnally  leases  are  ma.e  payable  -'--h^^^-  ^ 
some  cases  bi-monthly  or  quarterly.    In  some  part  o  th     oun  ry 
t  is  customary  to  pay  rent  in  advance.   In  other  -«     «  ^ 
is  due  at  the  end  of  the  month  or  other  charge  per,od.   Telephone 
Is  are  sometimes  paid  monthly  and  -et  mes  q^ar  ert. 
Thev  are  usually  due  at  the  end  of  the  charge  penod.    Insurance 
p'yiLn  advance,  frequently  for  a  period  of  one  year,  and  m  ma^>, 
cases  for  longer  periods,  as,  for  example,  three  or  fiv.  years^ 
T^es  are  payable  annually  at  the  end  of  the  fiscal  year  m  whtch 

"'  A  ^'^consideration  of  these  several  facts  will  show  that 

there  ards  of  doing  business  in  mutters  of  this  km.  accnung 

rom    tae  to  time  which,  so  far  as  individual  months  are  con- 

Tre  not  correctly  distributed  by  the  payme,;ts  as  they  are 

Tdl    O   the  rid!  the  tax  bill  may  be  paid  in  Decetnber  but 

made,   un  „„<..t„elfth  of  which  belongs  to  each  of  the 

"  "  '  r^thst  the  year    On  the  other  hand,  the  insurance  bill 
several  months  m  tne  year,    wn  ^.ujrtxr  civth 

ly  be  paid  in  January  for  three  years'  insurance,  on  -thirty-  .xth 
Tf  wWch  is  a  proper  charge  to  each  of  the  months  of  the  penod  _ 

It  is  not  sufficient  to  say  that  on  the  general  average  and  after 
.he  bus  ness  is  in  operation,  these  various  items,  taken  coUeCvely. 
even  u  or  balance  each  other.  Good  bookkeeping  and  good  bus- 
„e  management  demand  correct  accounting  for  each  o  these  ex- 
penses  in  a  way  to  let  each  month  stand  its  own  proper  share  of  the 


MMMWnVMW^OBMIJ^wwwMl 


j^,i^^,.^.-  ^^y-m^^^mi^-'  Y 


J 


i:!t»:!li!.i 


'SeSm 


ii  1 


280 


THE    SELF-PROVING 


burden  without  excess,  nor  yet  with  shortage.  It  is  recommended, 
therefore,  that  an  account  be  opened  with  each  of  these  expenses 
in  such  a  way  that  each  month  shall  be  debited  with  its  own  proper 
share,  letting  the  account  with  the  source  of  the  expense  be  cred- 
ited from  time  to  time,  irrespective  of  the  date  when  the  payment 
of  the  amount  is  made.  Two  illustrations,  typical  of  all  such  ex- 
penses as  are  here  cited,  are  sufficient  for  the  purpose. 

In  the  first  instance  we  will  assun  e  that  the  taxes  on  the 
stock  of  merchandise  and  other  assets  of  the  business  average 
$120  a  year,  and  that  the  tax  is  due  and  payable  in  December.  The 
matter  should  be  treated  as  follows: — During  the  month  of  Janu- 
ary an  account  should  be  opened  in  the  name  of  "The  Mayor,  Al- 
dermen and  Common  Council"  of  the  city,  or  in  such  other  name 
as  the  tax  bills  bear,  which  account  should  be  credited  with  $10,  or 
one-twelfth  of  the  estimated  assessment  for  the  year,  and  the 
proper  expense  account  debited  therewith,  and  similar  crefat. 
should  be  made  to  the  account  at  the  end  of  each  month  throu..  -, 
out  the  year,  with  the  proper  expense  account  debited  each  mor..!: 
in  like  sum.  The  account  that  is  thus  credited  should  be  placed 
in  that  portion  of  the  ledger  which  contains  the  accounts  of  the 
liabilities  of  the  establishment,  or,  as  classified  in  this  volume, 
among  Sundry  Creditors.  The  account  increases  month  by 
month,  showing  the  actual  liability  at  all  times,  until  finally,  at 
the  end  of  the  year,  or  whenever  the  pay  day  arrives,  it  is  dis- 
charged by  the  payment  of  the  taxes. 

With  respect  to  this  plan  it  may  be  objected  by  some  that  it 
is  not  always  possible  to  ascertain  the  exact  amount  of  taxes  so  far 
in  advance  as  twelve  months  prior  to  the  payment.  The  reply 
to  this  is  that  taxes  do  not  greatly  vary  from  year  to  year,  save, 
first,  where  there  is  an  unusual  increase  or  diminution  of  property 
reported  to  the  assessor,  and,  second,  where  the  tax  rate  varies 
from  that  of  previous  years.     These  conditions  are  known  by  the 


>ii.*i»i»ill»i!ili.ti»mi;iii»'i*«'''Wi(iiwriiwi»iiiiiiwi'»Mnmi' 


ummim^^immi^mi&£SiKf':4i9 ' 


ACCOUNTING    SYSTEM 


281 


;ommended, 
;se  expenses 
1  own  proper 
nse  be  cred- 
:he  payment 
all  such  ex- 
axes  on  the 
less  average 
:ember.  The 
nth  of  Janu- 
:  Mayor,  Al- 
other  name 
with  Sic,  or 
:ar,  and  the 
nilar  crec'ii 
ith  throu.. 
each  mor..'.: 
lid  be  placed 
ounts  of  the 
this  volume, 
month  by 
:il  finally,  at 
es,  it  is  dis- 

some  that  it 

f  taxes  so  far 

The  reply 

0  year,  save, 

1  of  property 
<  rate  varies 
nown  by  the 


business  man  in  a  way  to  enable  him  to  make  due  allowances  in 
estimating  the  amount  of  his  taxes  for  the  year.  The  records  of 
other  years,  the  report  that  is  made  to  the  assessor  and  the 
Knowledge  of  the  needs  of  the  city  or  county  as  aflfecting  the  tax 
rate  enable  the  merchant  to  calculate  the  amount  very  closely. 
In  managing  the  account  with  taxes  in  the  way  here  described  it 
is  expedient  to  assume  a  maximum  rather  than  a  minimum  sum 
as  the  amount  of  taxes  to  be  provided  for.  If  after  the  actual  tax 
bill  is  received  it  is  found  that  each  month  through  the  year  has 
been  charged  with  a  fraction  too  much,  then  the  amount  may 
be  evened  up  by  giving  December,  or  some  other  month  in  the 
latter  part  of  the  year,  the  benefit  of  the  excess  which  the  prior 
months  have  borne,  or  December  may  be  charged  with  the  same 
amount  as  the  other  months  and  the  excess  thrown  directly  into 
Loss  and  Gain  Account. 

The  other  illustration  of  expenses  of  the  kind  referred  to  will 
be  in  the  matter  of  insurance,  where  the  premium  has  been  paid  in 
advance,  we  will  say.  for  two  years.  Assume,  for  the  sake  of  illus- 
tration, that  in  January  of  a  certain  year  a  premium  of  $120  has 
been  paid  for  insurance  on  a  certain  portion  of  the  stock,  covering 
the  expense  in  this  regard  for  the  period  of  twenty-four  months. 
This  amount  at  the  time  of  payment  should  be  charged  to  an  ac- 
count opened  with  the  insurance  company,  or  the  insurance  broker 
through  whom  the  insurance  is  effected,  located  in  that  portion 
of  the  ledger  containing  accounts  representing  amounts  due  the 
business,  or,  as  accounts  are  classified  in  this  work,  among  Sun- 
dry Debtors.  The  account,  as  a  fact,  is  an  asset,  hecau."**.  if  for 
any  reason  it  is  desired  to  cancel  the  policy  the  premium  will  be 
returned  to  the  merchant  pro  rata,  or  allowed  to  apply  upon  an- 
other policy,  all  according  to  the  rules  of  the  insurance  company, 
Debit  the  insurance  company  or  insurance  agent,  therefore,  with 
the  premium  when  paid,  and  month  by  month  charge  to  the 


IgBl^-V  ^.:.^iiJ^'iii1^^^^fJUti<^^'  '•** 


■■■■■■Mi 


^»mi^u^timmm\iii»twmmltimimamKUKi*mcuiliii 


2g2  THE    SELF-PROVING 

proper  expense  account  its  pro  rata  amount,  crediting  the  com- 
pany or  agent,  as  the  case  may  be,  in  like  amount.  At  the  end 
of  the  first  year,  therefore,  one-half  of  the  premium  will  have  been 
consumed,  and  at  the  end  of  the  second  year  the  entire  amount 
will  have  been  consumed.  As  the  account  has  progressed,  near- 
ing  a  balance,  the  bookkeeper  or  business  man  will  have  been  re- 
minded thereby  that  a  renewal  of  the  insurance  is  in  order. 

Similar  methods  will  occur  to  the  bookkeeper  for  managing 
all  other  expense  costs  which  are  paid  either  in  advance  of  the 
charge  period  or  at  its  conclusion.  Care  should  be  taken  in  all 
such  cases  to  properly  apportion  the  expense  between  the  dififer- 
ent  months,  in  order  that  the  percentages  of  operating  expenses, 
which  it  is  desirable  to  work  out  accurately,  shall  always  cor- 
rectly represent  the  growth  and  development  of  the  business. 

If  rent  is  paid  monthly  no  account  is  necessary  with  the  land- 
lord, but  if  rent  is  allowed  to  go  unpaid  for  a  time  then  an  ac- 
count with  the  landlord  should  be  credited  month  by  month  with 
the  amount  due  him,  so  that  the  proper  charge  may  be  made  to 
expenses  for  the  month.  If  the  rent  is  payable  quarterly,  then 
an  account  with  the  landlord  should  be  opened  up,  with  proper 
credit  month  by  month,  with  corresponding  debit  to  the  ex- 
pense account.  If  telephone  charges  are  paid  monthly,  then  no 
account  is  necessary  with  the  telephone  company,  but  if  the  bill 
is  settled  only  at  long  intervals,  then  an  account  should  be  opened 
with  the  telephone  company,  to  be  credited  from  time  to  time 
with  the  cost  of  the  service  and  debited  whenever  the  liability  is 
discharged. 


ing  the  com- 
At  the  end 
/ill  have  been 
ntire  amount 
jressed,  near- 
liave  been  re- 
order. 

For  managing 
Ivance  of  the 
e  taken  in  all 
en  the  differ- 
ing expenses, 
1  always  cor- 
:  business, 
kvith  the  land- 
e  then  an  ac- 
y  month  with 
y  be  made  to 
uarterly,  then 
I,  with  proper 
it  to  the  ex- 
ithly,  then  no 
but  if  the  bill 
uld  be  opened 
time  to  time 
the  liability  is 


AVOIDING  COkFUSION  WITH  SALES  NUMBERS 

The  objection  has  been  raised  to  the  book  or  sheets  devoted 
to  the  Record  of  Sales  Numbers  in  the  Self-Proving  Account- 
ing System  that  it  is  possible  for  a  salesman  to  take  a  number 
from  the  book,  put  it  upon  a  pad  of  sales  sheets,  and  yet  fail  to 
record  the  name  of  the  customer  in  the  record  against  the  num- 
ber. This  would  result  in  the  next  salesman  taking  the  same 
number,  the  duplication  producing  a  state  of  confusion  not  at  all 
satisfactory.  Two  lots  of  goods  would  be  out  bearing  the  same 
number,  so  far  as  the  invoices  held  by  the  customers  ctro  con- 
cerned, and  also  as  indicated  by  the  slips  delivered  to  the  shipping 
department.  While  this  objection  has  some  force  in  certain  es- 
tablishments, it  is  deemed  to  be  of  very  little  importance  in  con- 
cerns as  ordinarily  constituted,  and  yet  it  can  be  readily  over- 
come. Several  plans  may  be  suggested  for  avoiding  the  difficulty 
and  lessening  the  danger  of  confusion  among  numbers. 

The  first  of  these  is  to  establish  the  rule  in  the  routine  of  sell- 
ing that  when  a  number  is  taken  from  the  Number  Record  a 
check  mark  shall  be  put  against  the  number  before  the  number 
is  written  on  the  sales  blank.  After  the  number  has  been  written 
on  the  sales  sheet,  the  name  of  the  customer  is  to  be  written  op- 
posite the  number  that  has  been  checked  on  the  Number  Record. 
The  effect  of  this  is  to  show  a  check  mark  against  the  number  on 
the  Record,  even  though  the  salesman,  in  his  hurry,  has  neglected 
to  write  in  the  custoamer's  name.  The  presence  of  the  check  mark 
is  as  complete  a  notification  to  the  next  salesman  that  the  num- 
ber opposite  it  has  been  used  as  though  the  name  of  the  customer 


ti' 


'V 


2M 


THE    SELF-PROVING 


were  written  there  in  full.  The  placing  of  a  check  mark  against 
the  number  becomes,  in  a  short  time,  so  much  a  matter  of  habit 
to  the  salesman  as  to  make  mistakes  in  this  regard  extremely  rare. 

Another  plan  employs  a  bell  register  with  numbers,  having 
the  number  space  in  its  face  covered  by  a  shutter.  The  shutter 
is  so  arranged  that  it  lifts  to  show  a  number  whenever  the  bell  is 
rung,  keeping  it  in  view  only  so  long  as  the  cord  or  lever  is  held 
down.  By  this  plan  there  is  revealed  to  the  salesman  the  number 
that  is  next  in  order,  and  against  which  he  is  to  record  the  name 
of  his  customer. 

A  third  plan  makes  use  of  the  ordinary  ofifice  numbering  ma- 
chine. This  device  is  so  fastened  in  place  on  the  desk  as  to  be 
readily  accessible  to  anyone  who  has  occasion  to  use  it.  The 
printing  lever,  however,  is  locked,  but  each  salesman  is  provided 
with  a  key.  When  opened  only  a  single  impression  can  be  made 
before  it  again  locks  automatically.  The  number  impressed  in 
this  way  upon  the  order  form  or  sales  sheet  shows  where  the  cus- 
tomer's name  is  to  be  recorded  in  the  Number  Record. 

Another  plan  which  has  been  found  to  work  well  in  such  cases 
uses  the  Record  of  Sales  Numbers  as  provided  in  the  system,  but 
restricts  the  care  of  the  book  to  a  clerk,  who  also  is  in  charge  of 
the  Sales  Sheets  and  order  blanks.  The  salesmen,  from  time  to 
time,  make  requisitions  on  this  clerk  for  an  order  holder,  with 
a  set  of  blanks,  of  whatever  kind  is  required.  In  response  there 
is  delivered  a  set  of  sheets  on  which  a  number  has  already  been 
printed  by  an  automatic  numbering  machine,  or  applied  thereto 
by  pen  or  pencil,  as  the  case  may  be.  When  this  pad  is  delivered  it 
is  charged  to  the  salesman  by  recording  opposite  the  number  on 
the  Number  Recoid  the  salesman's  initials.  This  plan  prevents 
any  two  sets  of  sales  slips  getting  out  which  bear  the  same  num- 
ber. It  also  removes  from  the  salesmen  the  responsibility  of  the 
record  in  the  Number  Record,  and  has  the  further  advantage 


ACCOUNTING    SYSTEM 


886 


nark  against 
tter  of  habit 
:remely  rare, 
bers,  liaving 
The  shutter 
er  the  bell  is 
lever  is  held 
the  number 
rd  the  name 

mbering  ma- 
esk  as  to  be 
Ltse  it.  The 
1  is  provided 
can  be  made 
impressed  in 
lere  the  cus- 
)rd. 

in  such  cases 
:  system,  but 
in  charge  of 
rom  time  to 
holder,  with 
sponse  there 
already  been 
plied  thereto 
s  delivered  it 
e  number  on 
Ian  prevents 


e  same  num- 
ibility  of  the 
;r  advantage 

1 

V    ' 

of  keeping  from  each  individual  salesman  the  opportunity  to  esti- 
mate what  his  fellow  salesmen  are  doing  by  inspecting  the  record 
of  their  customers.  Where  a  set  of  blanks  is  destroyed,  as,  fot 
example,  where  a  mistake  is  made  in  the  customer's  name  or  ad- 
dress, or  where  an  order  is  cancelled  after  it  has  been  partly  en- 
tered up,  the  mutilated  set  of  sheets  is  returned  to  the  office  and 
a  fresh  set  is  handed  out  in  its  place.  This  plan  is  perhaps  the 
simplest  to  install,  all  things  considered,  and  has  various  special 
advantages  attending  its  use.  In  a  small  estabUshment  the  re- 
sponsibility of  handling  the  sales  binders  or  pads  would  be  a  sub- 
division of  the  work  of  the  entry  clerk,  or  the  bookkeeper,  or 
someone  else  who  could  conveniently  attend  to  it. 

Still  another  plan  may  be  suggested,  and  is  one  which  substi- 
tutes for  the  Number  Record,  book  or  sheet  form  as  the  case  may 
be,  the  device  known  as  the  Autographic  Register.    The  record 
of  sales  numbers  is  printed  in  duplicate  on  the  rolls  with  which 
this  machine  is  provided,  and  a  carbon  sheet  is  inserted  in  the  usual 
manner.    The  opening  in  the  inclined  face  of  the  machine  is  re- 
stricted to  the  space  in  the  printed  form  devoted  to  a  single 
number.     It  becomes  the  salesman's  duty  then,  when  getting  a 
number  for  his  order,  to  write  the  customer's  name  in  the  open 
space  shown  on  the  face  of  the  machine  opposite  the  number 
there  shown,  turn  the  crank  and  tear  oflf  the  slip  that  is  thrown 
out.    This  slip,  after  its  number  has  been  written  on  the  order 
form,  in  the  space  provided  for  the  purpose,  is  attached  to  the 
order  and  turned  into  the  ofifice  as  evidence  of  the  correctness 
of  the  number  used.    Inside  of  the  Autographic  Register  on  the 
second  roll  is  the  duplicate  made  by  carbon  of  the  name  which 
the  salesman  has  written  opposite  the  number  which  he  has  used. 
This  plan  insures  the  numbers  being  used  seriatim,  and  most 
effectually  provides  against  two  orders  being  entered  against  a 
single  number. 


PART    IV 


SUGGESTIONS  TO  INSTALMENT 
MERCHANTS 


1 


J 


r^;j^!t^iLi-^i~:w3ta!t^M 


CHARACTER    OF    THE    ADVICE 

The  advice  and  suggestions  presented  in  the  following  pages 
are  based  upon  the  practical  experience  of  an  instalment  dealer 
who  has  been  successful  in  the  conduct  of  a  business  through  a  long 
term  of  years.  The  items  of  advice  are  presented  not  in  an  offi- 
cious way,  nor  in  the  sense  that  other  merchants  do  not  know  how 
to  manage  their  affairs,  but  instead  with  the  feeling  that  there  are 
some  who  will  be  benefited  by  at  least  a  part  of  what  is  here  offered. 

Those  who  do  not  need  advice  and  counsel  will  of  course 
skip  this  part  of  the  book.  The  pages  will  not  be  the  less  mter- 
esting  on  that  account,  however,  to  those  who  are  able  to  make 
use  of  what  is  presented.  On  the  other  hand,  there  are  many  who 
are  considering  the  expediency  of  entering  upon  the  plan  of  instal- 
ment sales.  The  leading  question  in  the  mind  of  such  a  merchant 
is  dual  in  character.  ■  First  there  is  the  problem  of  the  necessary 
bookkeeping  or  business  machinery  which  it  is  the  mission  of  other 
parts  of  this  book  to  describe,  and,  second,  there  are  the  features  of 
the  business  itself,  together  with  its  limitations,  to  be  considered. 

Only  the  more  prominent  features  of  the  instalment  or  credit 
business  are  here  discussed.  There  is  much  omitted  which  might 
have  been  included,  but  which  if  presented  would  only  have  swelled" 
the  volume  to  unwieldy  dimensions.  Enough  is  given,  however,  to 
enable  those  who  are  not  employing  a  satisfactory  system  to  make 
improvements  and  to  help  those  who  are  considering  a  change  in 
their  business  plans  to  judge  intelligently  of  the  advantages  of 
selling  upon  the  instalment  plan. 


J 


ATTENTION    TO    CUSTOMERS'    WANTS 


In  the  instalment  business  there  are  very  many  reasons  why 
customers  become  displeased  and  feel  that  they  have  grievances. 
In  the  first  place,  the  environments  and  education  of  the  majority 
of  the  people  who  buy  upon  the  instalment  plan  are  such  as  to 
make  them  supersensitive  and  to  cause  them  in  many  instances  to 
magnify  the  importance  of  very  small  matters.  Whenever  a  cus- 
tomer has  a  complaint  or  feels  displeased,  unless  he  is  given  proper 
attention  at  once  his  resentment  is  likely  to  go  so  far  as  to  greatly 
damage  the  reputation  of  the  house.  It  is  essential  to  the  interests 
of  the  merchant  that  the  customer  always  should  be  pleased,  in  or- 
der that  business  relations  may  be  maintained  upon  a  satisfactory 
basis.  It  is  still  more  essential,  however,  that  the  customer  should 
be  so  well  pleased  that  his  influence  among  his  friends  and  ac- 
quaintances is  always  in  favor  of  the  house  rather  than  against  it. 

The  merchant  may  find  it  very  difficult  sometimes  to  comply 
with  the  requests  that  are  made  and  to  investigate  all  the  com- 
plaints that  are  entered,  particularly  as  they  are  very  often  appar- 
ently trivial  and  because  they  occur  so  frequently.  Still,  his  posi- 
tion is  such  that  he  cannot  afford  to  really  quarrel  with  the  cus- 
tomer, and  therefore  he  must  be  willing  to  go  a  good  way  to  satis- 
fy the  customer  and  retain  his  good  will.  The  recommendation  of 
the  store  by  a  customer  to  his  friends  is  worth  a  great  deal  to  a  mer- 
chant doing  business  upon  the  instalment  plan,  and  therefore  the 
trouble  and  expense  that  it  may  be  to  attend  to  his  customers' 


ACCOUNTiNO    SYSTEM 


201 


NTS 

reasons  why 
;  grievances, 
the  majority 
e  such  as  to 
instances  to 
"never  a  cus- 
given  proper 
as  to  greatly 
» the  interests 
^leased,  in  or- 
a  satisfactory 
itomer  should 
iends  and  ac- 
lan  against  it. 
nes  to  comply 
»  all  the  com- 
y  often  appar- 
Still,  his  posi- 
with  the  cus- 
d  way  to  satis- 
nmendation  of 
t  dealto  a  mer- 
d  therefore  the 
his  customers' 


complaints  can  very  properly  he  regarded  as  an  advertising  ex- 
pense. 

Looking  at  the  question  another  way,  and  in  view  of  the  in- 
jury or  damage  that  may  be  done  by  a  customer  who  has  been  dis- 
pleased in  his  transactions,  and  who  indulges  in  talk  against  the 
store,  while  meantime  paying  his  own  account  very  reluctantly, 
the  trouble  and  expense  of  pleasing  customers  may  be  regarded  as 
an  insurance — something  that  is  paid  out  from  time  to  time  for  the 
purpose  of  insuring  prompt  and  satisfactory  settlements. 

When  customers  are  delinquent  in  payments  through  sick- 
ness, hard  luck,  lack  of  employment  and  other  causes,  the  mer- 
chant must  use  careful  judgment  in  order  to  avoid  doing  that 
which,  from  the  customer'.^  point  of  view,  may  seem  harsh  or  un- 
just. When  the  merchant  is  satisfied  that  his  customer  is  honest 
and  is  doing  the  best  that  he  can,  and  that  he  will  pay  as  soon  as  he 
is  able,  it  is  better  to  wait  six  months,  or  a  year,  or  even  two  years 
if  necessary,  thereby  obtaining  the  gratitude  of  the  man  and  his  en- 
thusiastic indorsement  of  the  house  among  his  friends,  than  to  re- 
sort to  harsh  measures  and  produce  opposite  results.     Leniency  in 
matters  of  this  kind,  as  the  instalment  merchant  soon  finds,  always 
results  in  profit  in  the  end,  whereas  severe  measures,  harshly  en- 
forced, result  almost  always  in  a  loss.     To  sum  up  this  advice,  the 
merchant's  best  interests  are  served  by  carefully  studying  his  cus- 
tomers, and  acceding  to  their  whims  whenever  he  can,  satisfying 
their  Uttle  wants  as  opportunity  presents,  and  being  intelligently 
considerate  in  their  times  of  misfortune.     He  should  at  all  times 
and  under  all  conditions  make  them  feel  that  he  is  their  friend. 

Of  course  there  is  a  line  to  be  drawn  somewhere.  Only  the 
most  discreet  judgment,  however,  is  adequate  to  determine  when 
a  man  is  deserving  of  leniency  and  favors  and  when  the  opposite 
conditions  prevail..  But  it  is  better  for  the  business  to  occasion- 
ally show  favors  to  an  undeserving  man  than  regularly  to  turn 


292  THE    SELF-PROVma 

down  those  who,  by  their  character  and  circumstances,  are  really 
entitled  to  consideration.  Where  a  customer  is  proven  to  be 
tricky  and  dishonest  it  is  still  wise  to  use  caution  in  handling  him, 
so  as  not  to  cause  any  more  unpleasantness  than  already  exists. 


c     .i 


,\i. 


:i    ^\- 


:.i:TriiTrriTT  '-•^■^"■-'■■'■'^-^'^ 


~1 


\,  are  really 
Dven  to  be 
ndling  him, 
y  exists. 


AVOIDING    NUMEROUS    LEASES    OR      CONTRACTS 
WITH    THE    SAME    CUSTOMER 

Comparatively  few  persons,  in  buy.:ig  furniture  or  household 
goods  on  the  instalment  plan,  have  at  the  outset  a  complete  hst 
of  what  is  required.    After  a  part  of  the  goods  is  delivered  they 
discover  still  further  needs,  and  therefore  desire  to  extend  the 
purchase  to  cover  the  same.     If  the  original  contract  or  lease  has 
been  closed,  it  becomes  necessary  to  make  a  new  one  m  order  to 
cover  the  additional  articles.     For  bookkeeping  reasons,  as  well 
as  others,  it  is  objectionable  to  have  numerous  leases  or  contract 
sales  with  the  same  person  at  a  given  time,  and  therefore  care 
should  be  taken  to  get  all  the  goods  that  the  customer  requires 
entered  under  a  single  contract. 

For  this  reason  it  is  frequently  expedient  to  keep  the  sales 
sheet  open  for  a  little  time  after  the  sale  has  apparently  been  com- 
pleted     This  plan  is  quite  possible,  and  a  little  care  will  very  gen- 
erally accompUsh  the  object,  thus  carrying  the  entire  bill  in  a 
single  item  in  the  Instalment  Ledger,  where  otherwise  several 
contracts  would  exist.     No  fixed  directions  can  be  offered  in  mat- 
ters of  this  kind.     It  is  necessary  to  exercise  discretion  m  each 
individual  case.     It  is  always  possible  to  keep  a  sale  open  for,  say, 
two  or  three  days'  time,  and  a  Uttle  questioning  of  the  customer 
upon  the  part  of  the  discreet  salesman  will  almost  always  deter- 
mine whether  or  not  more  goods  are  Hkely  to  be  required.    The 
ruHng  of  the  Instalment  Ledger  is  such  that  two  or  even  three 
sales  may  be  entered  up  in  any  given  month,  but  aside  from  this  it 


204 


THE    SELF-PROVING 


is  expedient,  for  reasons  already  explained,  to  keep  the  business 
as  much  condensed  as  possible,  and  to  this  end  have  the  sales  con- 
tracts as  few  in  number  a§  may  be. 


t  r 


e  business 
;  sales  con- 


PARTIAL    DELIVERIES 


I.  sometimes  happens  that  an  order  from  a  customer  who 
buys  under  lease  or  contract  cannot  be  fully  delivered  m  one  lot. 
Sometimes  the  delay  in  delivery  of  a  portion  of  the  goods^^s  du 
.0  conditions  in  the  store;  sometimes  the  delay  .s  due   o  the  cu 
tomer  being  uncertain  as  to  the  dimensions  of  some  of  the  ar  .cles 
hara'e  covered  by  the  contract,  and  which  are  to  be  made  up 
according  to  dimensions  to  be  supplied.    Somet.mes  .t  .s  due  to 
rLlc'of  goods,  waiting-for  the  -val  of  ^m^'";;;^  *:^; 
known  to  be  in  transit,  and  sometimes  .t  .s  d-  '»  «''--   ^ 
time  required  to  measure  for  and  make  the  carpets.    Somet  mes 
bv   eason  of  one  of  these  causes,  and  again  by  reason  of  others 
theeTsa  delay  of  one  day  or  several  days  between  the  da  e  of  the 
sae  rshown  on  the  Number  Record,  and  the  time  that  ,t  ,s 
om^ted,  so  that  it  can  be  charged  on  the  Sales  Reco^^ 

It  is  advised  in  such  cases  that  withm  reasonable  l.m  ts  par 
,ial      iveries  be  carried  on  the  Sales  Slip  until  the  dehvery  .s 
cot  Led,  so  that  when  the  charge  to  the  --mer  .  ma  e   nd 
corresponding  credit  given  to  Sales  Account,  the  "■■''e'-  ^^aU  be 
comolete     While  the  order  is  being  thus  earned  upon  the  Sales 
Slbpartial  deliveries  may  be  made  from  time  to  time,  and  when 
o  matthe  goods  delivered  indicated  by  checking  v^    tj-e  s^p- 
ner's  initials  and  the  date  in  the  proper  column  of  the  sh.pper  s 
p        the  Sales  Slip.    By  this  plan  the  blanU  spaces  m  .h,s  co - 
„1  on  the  Sales  Slip  will  at  all  times  show  ,ust  what  goods  are 
vet  to  be  delivered. 


II 


296 


THE    SELF-PROVING 


The  plan  prevailing  in  some  establishments  of  running  the 
sales  charges  on  to  Sales  Record  before  the  order  is  completed, 
leaving  the  amount  column  blank,  to  be  filled  in  whenever  the 
order  is  finished,  is  objectionable,  because  in  the  event  of  the  final 
delivery  being  delayed  several  days  the  books  are  thereby  put 
that  much  behind  time,  so  far  at  least  as  proper  credits  to  Sales 
Account  and  charge  to  the  Instalment  Ledger  are  concerned. 
Nor  is  it  expedient  to  make  the  charge  to  the  customer  before 
the  delivery  is  completed,  even  though  the  value  of  the  items  is 
fully  determined.  It  is  neither  good  business  nor  good  book- 
keeping to  make  a  charge  for  merchandise  on  the  books  prior  to 
the  delivery  of  the  same  to  the  customer.  It  is  necessary,  there- 
fore, to  urge  upon  the  delivery  department,  and  all  concerned, 
the  importance  of  a  speedy  completion  of  the  order,  to  the  end 
that  the  books  may  be  kept  up  to  date.  Extra  effort  should  be 
made  in  this  direction,  because  in  the  instalment  bus'iiess,  unlike 
ordinary  merchandising,  the  amount  of  a  sale  cannot  be  split  up 
and  charged  in  several  items  upon  the  ledger  according  to  the  de- 
liveries. The  lease  or  contract  calls  for  a  fixed  amount,  and  the 
ledger  charge  should  show  the  same  amount  in  one  sum. 

It  sometimes  happens  that  a  lease  is  made,  even  to  the  ex- 
tent of  the  first  payment  on  account,  with  directions  for  delivery 
a  week,  a  month  or  even  three  months  later.  The  plan  that  is 
expedient  to  pursue  in  such  cases  is  to  get  the  goods  ready  for 
delivery  and  to  assign  them  a  special  place  in  the  warehouse, 
there  to  wait  the  customer's  order  for  final  delivery.  In  such 
cases  the  charge  should  be  put  through  the  books  at  once,  be- 
cause the  goods  have  been  actually  supplied,  although  not  de- 
livered to  their  final  destination.  They  are  the  customer's  goods 
by  the  terms  of  the  contract,  but  are  temporarily  held  in  a,  place 
different  from  that  to  which  they  are  to  be  finally  consigned. 
Goods  are  also  sometimes  held  by  the  consent  of  the  customer, 


.^Mi 


ACCOUNTING    SYSTEM 


297 


inning  the 
completed, 
enever  the 
of  the  final 
lereby  put 
ts  to  Sales 
concerned, 
mer  before 
he  items  is 
ood  book- 
ks  prior  to 
>ary,  there- 
concerned, 
to  the  end 
:  should  be 
less,  unlike 
be  split  up 
J  to  the  de- 
tit,  and  the 
m. 

to  the  ex- 
:or  delivery 
ilan  that  is 
s  ready  for 
warehouse, 
'.  In  such 
t  once,  be- 
gh  not  de- 
ler's  goods 
1  in  a,  place 

consigned. 
!  customer, 


or  at  the  option  of  the  merchant,  because  only  a  part  of  the  first 
payment  has  been  made.  Where  the  goods  have  been  actually 
sold  and  are  kept  in  a  special  lot  by  themselves  in  the  warehouse 
there  can  be  no  objection  to  the  charge  going  through  the  books, 
even  though  the  goods  have  not  yet  left  the  merchant's  premises. 


,,ii^l(.,i.lliH.-HPMl|i* 


S'l 


JIODIFICATION    OF    CONTRACTS 
I.  should  be  laid  down  in  every  credit  business  where  lease  or 
contract  sales  are  made  that  neither  additions  to  - ;''^"*;; 
from  nor  yet  changes  of  any  other  kind  are  to  be  made  on  order 
forms  or  contracts  after  the  arrangement  has  once  been  co.np.^ed 
and  signed.    The  temptation  to  do  this  is  very  great.    For 
ample  if  a  customer  should  buy  a  bedroom  suit  at.  say  $.5,  along 
Th  other  articles,  and  after  the  sale  is  completed,  w,th  the  con- 
tract signed,  he  should  make  up  his  mind  that  he  P-f-«d  t'- 
other bedroom  suit  that  he  had  been  looking  at.  cos.mg.  say  $30, 
the  papers  should  not  be  altered  .0  suit  the  change  m  pnce.  b„ 
Lstead  the  original  contract  should  be  cancelled  and  a  new  one 

made  out  from  beginning  to  end.  ■.„„„„,.  \. 

To  change  an  item  in  a  contract  or  lease  above  a  s.gnature 
wrong  in  principle  and  hazardous  in  the  extreme  .n  practice     It 
Xe-oom  for  dispute  upon  the  part  of  the  -'omer^  eca  ,e  on 
L  most  casual  exa„nnation  there  ,s  the  — e  <,   -h-ge 
having  been  made,  and  the  customer  may  assert  that  the  change 
rbln  made  to  his  disadvantage  and  ^^"^ ^^^ 
subsequent  to  the  signing.    The  evidence  afforded  by  the  face  of 
thelease  or  contract,  when  it  comes  up  for  scrutiny,  .s  strong  cor- 
ob^ltion  of  the  truth  of  the  contention  of  the  custom.,  an 
therefore  in  the  interest  of  the  merchant  the  contract  o,;  lease  rnust 
ahvavs  be  kept  free  from  additions,  deductions  or  amendments  o 
arkind.    Wherever  changes  are  made,  irrespective  o  the  speetal 
eason  governing  the  change,  the  original  contract  or  lease  should 


ACCOUNTING    SYSTEM 


290 


^here  lease  or 
5r  deductions 
lade  on  order 
!en  completed 
eat.     For  ex- 
say  $25,  along 
with  the  con- 
preferred  the 
iting,  say,  $30* 
;e  in  price,  but 
and  a  new  one 


be  cancelled  and  a  new  one  made  out,  correctly  representing  the 
■  transaction  in  its  modified  form.     By  this  plan  the  record  of 
transactions  is  kept  straight  without  any  confusion  or  m.xmg. 

It  occasionally  occurs  that  an  article  has  been  sold  to  a  cus- 
tomer which,  when  it  comes  to  an  examination  of  "«  »•»* '^ 
found  to  have  been  previously  sold  to  some  one  ^^^<:- '"\^'  '""' 
is  no  dupHcate  in  stock  it  can  be  delivered  only  to  the  firs,  pur- 
chaser     This  is  upon  the  assumption  that  no  more  of  tins  precse 
article  is  to  be  had.    Under  such  circumstances  there  >s  „oth,ng 
left  to  do  but  to  cancel  the  sale,  so  far  as  th,s  ptece  of  "'"  hand.se 
concerned,  which,  of  course,  means  that  the  lease  that  has  b«n 
made  out  and  signed  must  be  cancelled  and  a  new  -e  covenng 
,he  goods  as  they  were  actually  delivered  must  be  executed.    Th.s 
nvariable  rule,  with  reference  to  additions,   deduct.ons  and 
c I  ,ges  n  contracts  and  orders,  must  be  carefully  observed  .n 
order  to  avoid  no.  only  confusion  in  records,  but  a  dub.ous  post- 
tion  in  case  legal  measures  for  collections  are  resorted  to. 


e  a  signature  is 
in  practice.     It 
ner,  because  on 
ce  of  a  change 
;hat  the  change 
his  knowledge 
d  by  the  face  of 
ly,  is  strong  cor- 
e  customer,  and 
act  or  lease  must 
•  amendments  of 
ive  of  the  special 
:t  or  lease  should 


CHANGING  THE  FORM  OF  A  CUSTOMER'S  AC- 
COUNT 

Sales  are  sometimes  made  upon  the  understanding  at  the 
time  that  the  debt  is  to  be  immediately  discharged  by  the  payment 
of  cash,  which,  later,  by  arrangement  with  the  customers,  are . 
changed  into  lease  sales  with  instalment  payments.  The  account 
in  the  first  instance  has  been  located  in  that  portion  of  the  ledger 
devoted  to  open  account  sales,  or,  as  here  classified.  Sundry 
Debtors,  and,  with  the  change  in  the  terms  of  payment,  is  to  be 
transferred  to  the  Instalment  Ledger. 

Two  plans  of  accomplishing  this  result  present  themselves. 
One  is  to  close  the  account  in  Sundry  Debtors'  Ledger  by  bal- 
ance transferred  to  the  new  account  located  in  Instalment  Ledger. 
For  this  purpose  the  Cash  Journal  provides  the  necessary  means 
with  its  pairs  of  columns,  making  the  operation  one  of  great  sim- 
plicity, without  any  danger  of  derangement  in  balances  or  classi- 
fication. The  objection  to  this  plan,  however,  is  that,  while  in 
a  sense  it  shows  the  actual  history  of  the  transaction,  the  account, 
as  opened  in  the  Instalment  Ledger,  commencing  with  a  balance, 
does  not  correspond  with  the  terms  of  the  lease  or  contract. 
Therefore  it  is  desirable  to  pursue  the  other  plan — namely,  that 
of  undoing  all  that  was  done  prior  to  the  signing  of  the  lease — and 
starting  the  instalment  sale  as  though  it  were  a  new  transaction 
dating  with  the  signing  of  the  lease  or  contract. 

The  first  step  in  this  plan  is  to  make  out  the  sale  contract  or 
lease  in  the  usual  form  and  allow  the  transaction  to  pass  in  regular 
course  as  a  contract  sale  through  the  books.    The  original  trans- 


^ER'S    AC- 

nding  at  the 
the  payment 
jstamers,  are 
The  account 
of  the  ledger 
ified,  Sundry 
lent,  is  to  be 

t  themselves, 
sdger  by  bal- 
tnent  Ledger. 
:essary  means 
of  great  sim- 
ices  or  classi- 
:hat,  while  in 
,  the  account, 
ith  a  balance, 
or  contract, 
-namely,  that 
he  lease — and 
w  transaction 

le  contract  or 
)ass  in  regular 
jriginal  trans- 


li 


ws^smm^- 


ACCOUNTING   SYSTEM 


801 


action  is  to  be  undone  or  cancelled  upon  the  same  general  plan  as 
is  described  in  another  portion  of  this  volume,  where  goods  re- 
turned and  sales  cancelled  are  discussed.  The  money  that  has 
been  paid  on  the  account  will  go  through  the  form  as  a  refund,  so 
as  to  get  back  into  the  customer's  hands,  and  then,  in  turn,  be 
paid  back  to  the  firm  on  account  of  the  lease  purchase. 

This  plan,  when  considered  in  its  few  details,  is  very  simple 
and  has  the  special  advantage  of  making  the  records  in  the  books 
agree  in  all  particulars  with  the  terms  of  the  lease.  Where  the 
records  of  transactions  do  not  agree  with  the  terms  of  the  lease 
there  is  more  or  less  confusion  in  the  progress  of  the  account,  with 
the  necessity  from  time  to  time  of  referring  back  to  the  records  of 
the  original  transaction  which  was  cancelled.  It  is  better,  there- 
fore, to  be  to  the  slight  labor  of  cancelUng  and  undoing  the  origi- 
nal transaction  at  the  outset  and  starting  anew,  in  accordance 
with  the  second  agreement,  the  same  as  though  the  first  had  never 
occurred,  than  to  have  the  necessity  of  reference  to  the  first  con- 
stantly coming  up  as  the  account  progresses.  There  is  also  this 
further  advantage,  that  by  making  the  transfer  upon  the  plan  last 
suggested  the  account  in  the  Instalment  Ledger  and  the  account 
as  shown  in  detail  by  the  customer's  card  will  agree  in  all  par- 
ticulars. 

In  establishments  doing  business  of  a  considerable  magnitude 
it  will  be  found  that  this  change  of  plan  of  buying  upon  the  part  of 
customers  occurs  quite  frequently.  It  is  essential  to  the  book- 
keeper in  charge,  therefore,  to  establish  the  proper  rule  for  mak- 
ing the  transfer  at  the  very  beginning  and  to  rigidly  enforce  the 
rule  in  all  cases. 


i 


GLiARDING     AGAINST     DUPLICATE     RECEIPTS 

'^'.istomers  are  frequently  careless  in  the  matter  of  their  pay 
cards.  They  often  call  at  the  office  to  make  payments  without 
bringing  their  cards  svirh  them,  notwithstanding  the  injuncuon 
which  is  nronilnently  printed  thereon  to  the  efifect  that  the  card 
must  be  produced  whenever  a  payment  is  made.  Under  such 
conditions  a  formal  receipt  must  be  given.  In  turn,  customers 
frequently  claim  to  be  too  busy  to  stop  to  hunt  up  the -pay  card 
when  the  collector  calls  for  a  payment,  and  therefore  demand  a 
formal  receipt  for  the  amount  that  they  pay  him.  Again,  with 
the  inconsistency  that  is  always  to  be  noticed  when  people  of  this 
class  are  closely  scrutinized,  the  same  persons  will  a  little  later 
produce  their  pay  cards,  either  at  the  office  or  when  a  collector 
calls,  and  demand  the  entry  thereon  of  the  amounts  which  they 
have  paid  when  the  card  was  not  presented. 

The  thoughtless  collector  or  clerk,  knowing  from  the  ledger 
or  from  the  duplicate  pay  card  that  the  amounts  referred  to  have 
been  duly  received  by  the  house,  might  proceed  to  make  the  en- 
tries on  the  pay  card,  with  the  result  that  thereby  the  customer 
would  have  two  receipts  for  the  payments.  Some  customers  are 
so  dishonest  as  to  take  advantage  of  circumstances  of  this  kind 
and  stoutly  maintain  at  the  time  of  the  final  settlement,  frequently 
long  after  the  transaction  occurred,  that  on  a  given  date  two  pay- 
ments of  like  amount  were  paid,  and  in  evidence  produce  the  for- 
mal receipt  in  one  handwriting  and  the  credit  on  the  pay  card  in 
another.     Still  other  customers  from  mere  thoughtlessness  or  by 


C- 


ICEIPTS 

of  their  pay 
ents  without 
le  injunciion 
;hat  the  card 

Under  such 
n,  customers 
the  -pay  card 
•re  demand  a 

Again,  with 

people  of  this 

a  little  later 

:n  a  collector 

s  which  they 

►m  the  ledger 
erred  to  have 
make  the  en- 
tile customer 
lustomers  are 
1  of  this  kind 
It,  frequently 
late  two  pay- 
duce  the  for- 
e  pay  card  in 
essness  or  by 


ACCOlNTINd  HY8TEM 


ft03 


accident  make  claims  of  this  kind  honestly.  Irrespective  of  the 
motive,  the  merchant  is  in  position  to  lose  whenever  such  a  claim 
is  made,  and  therefore  there  is  the  necessity  of  stringent  rules  in 
the  collection  department  covering  this  point. 

Receipts  are  undoubtedly  necessary  whenever  payments  are 
made  at  the  office  without  the  card,  and  receipts  are  also  neces- 
sary where  payments  are  made  to  collectors  and  the  card  is  not 
])roduced.  It  is  not  necessary,  however,  to  make  the  credit  on 
the  card  at  a  later  date  when  it  is  produced  simply  because  the 
customer  demands  it.  Entries  on  the  customer's  card  subse- 
quent to  the  time  of  the  payment  should  be  made  only  as  the  re- 
ceipts given  when  the  payments  were  made  are  duly  surrendered. 
It  is  expedient,  therefore,  to  lay  down  the  broad  rule  that  no 
credits  are  to  be  entered  upon  customers'  cards  except  for  money 
paid  in  hand,  or  for  a  receipt  representing  a  payment  made  when 
the  card  was  not  at  hand  duly  surrendered.  ♦ 

Occasionally  a  customer  loses  or  misplaces  a  receipt  which 
has  been  issued  to  him,  either  from  the  office  or  by  a  collector,  for 
an  amount  naid  when  the  pay  card  was  not  at  hand.  In  due 
course  he  will  ask  to  have  this  amount  entered  upon  his  card  in 
order  to  make  it  correspond  with  the  true  condition  of  the  ac- 
count. Precaution  must  be  exercised  in  this  case,  as  well  as  in 
the  others  cited,  because  there  is  no  assurance  that  the  receipt 
will  not  be  found  at  some  future  time.  When  the  entry  is  made 
on  the  customer's  card,  at  his  request,  there  should  be  entered  at 
the  same  time  a  statement  to  the  effect  that  the  credit  is  made 
after  the  date  which  it  bears,  and  that  it  is  done  at  customer's 
request  and  upon  his  statement  that  the  formal  receipt  issued  for 
the  same  cannot  be  found.  This  entry  may  be  abbreviated  ac- 
cording to  the  usage  of  the  establishment,  into  something  like 
the  following  form: — "Cancel  receipt  for  like  amount  of  this 
date."     Where  matters  of  this  kind  are  of  frequent  occurrence  a 


304 


THE  SELF.PROVIN<» 


rub])er  stamp  would  save  labor  and  reduce  the  matter  to  regular 

routine. 

Customers  are  sometimes  so  unfortunate  as  to  lose  their  pay 
cards,  in  which  case,  of  course,  they  are  entitled  to  duplicates 
Great  care  should  be  exercised  in  such  cases  also  in  issuing?  dupli- 
cates.    In  the  first  place,  the  precaution  to  compare  with  the 
ledger,  in  order  to  make  sure  that  the  new  card  issued  corresponds 
exactly  with  the  ledger  account,  should  be  taken.     In  the  ne?ct 
place,  the  new  card  should  be  marked  "DupUcate,"  or  otherwise 
distinguished  in  such  a  way  that  in  case  the  lost  card  should  be 
subsequently  found  no  irregularity  would  arise,  either  to  the  loss 
of  the  merchant  or  to  the  embarrassment   of  the   customer. 
Where  items  are  entered  upon  the  duplicate  pay  card  for  which 
receipts  have  been  previously  given,  there  should  be  the  reference 
to  the  receipt  being  taken  up  and  cancelled  as  above  described, 
and  in  all  other  respects  care  should  be  taken  to  guard  against  the 
loss  which  might  occur  if  the  new  card  were  issued  carelessly. 


1. 


r  to  regular 


Dse  their  pay 
3  duplicates 
ssuinj?  dupli- 
ire  with  the 
[  corresponds 
In  the  ne?ct 
or  otherwise 
,rd  should  be 
er  to  the  loss 
le  customer, 
ird  for  which 
the  reference 
ive  described, 
:d  against  the 
arelessly. 


CARE    ABOUT    RECEIPTING    "IN 

DEMANDS " 


FULL    OF     ALL 


A  word  of  caution  is  in  order  with  reference  to  receipting  cus- 
tomers' accounts  in  full,  without  such  special  investigation  it  the 
time  as  will  determine  the  correctness  of  the  claim  that  the 
amount  tendered  is  in  full.  Customers  will  sometimes  take  a  col- 
lector, or  even  office  cashier,  ofT  guard  on  matters  of  this  kind.  A 
pay  card  will  be  presented  on  which  there  is  a  small  balance  due, 
along  with  the  tender  of  the  money,  with  the  request  for  a  receipt 
in  full  of  all  claims  to  date.  If  such  a  receipt  is  given  without 
prior  reference  to  the  ledger  for  the  purpose  of  determining  that 
this  account  is  the  only  one  with  this  particular  customer,  the 
chances  are  that  a  receipt  will  be  given  as  sweeping  as  above  men- 
tioned, when,  in  fact,  there  is  an  additional  amount  due  from  the 
customer. 

Cross  references  should  at  all  times  be  maintained  between 
the  different  accounts  with  the  same  customer,  where  the  ac- 
counts are  not  consolidated,  and  pay  cards  should  be  kept  to- 
gether if  it  is  not  expedient  to  consolidate  them.  With  the  great- 
est care,  the  opportunity  is  sometimes  presented  for  a  customer 
to  make  such  a  demand  as  mentioned  above,  either  honestly  and  by 
accident,  or  with  intention  to  defraud.  The  word  of  caution, 
•  therefore,  is  this: — Never  receipt  a  customer's  account  without 
first  referring  to  the  ledger,  in  order  to  determine  that  the  amount 
tendered  is  in  fact  a  full  payment  to  date. 


LOANS    TO    CUSTOMERS 

Circumstances  frequently  arise  in  the  conduct  of  the  instal- 
ment business  wherein  it  is  expedient  to  advance  a  small  amount 
of  money  to  a  customer.     There  may  be  sickness  in  his  far.ily,  or 
he  may  have  lost  employment,  and  from  either  of  these  causes 
mav  have  become  so  reduced  in  resources  as  to  be  not  only  unable 
to  meet  his  instalment  payments  when  they  become  due,  but  also 
his  rent.     The  landlord,  therefore,  is  about  to  eject  him,  or  some 
other  creditor  is  making  trouble  for  him,  and  for  one  or  the  other 
of  these  reasons  the  goods  in  his  possession,  the  title  of  which,  of 
course,  is  in  the  instalment  dealer's  name,  are  in  more  or  less  jeop- 
ardy.    Under  such  circumstances,  and  others  which  it  is  not  neces- 
sary to  specify  in  this  connection,  the  interests  of  the  instalment 
merchant  and  those  of  the  customer  become  altogether  mutual. 

It  is  certainly  to  the  disadvantage  of  the  merchant  that  the 
goods  should  be  removed  from  the  house,  either  because  the  cus- 
tomer is  obliged  to  vacate  the  premises  by  reason  of  non-payment 
of  rent,  or  for  any  other  cause.     It  would  be  a  considerable  loss  to 
the  customer  to  be  compelled  to  make  a  forced  move  of  this  kind. 
Such  an  event  would  interfere  materially  with  his  ability  to  resume 
payments  after  the  existing  season  of  hard  luck  had  passed  by. 
The  customer  therefore  comes  to  the  merchant  and  makes  a  frank 
statement  of  the  situation.     The  merchant,  in  vie\\  of  all  the  cir- 
cumstances, perceived  that  it  would  be  to  his  advantage  to  ad- 
vance a  small  amount  of  money  to  his  customer  for  use  in  paying 
the  rent,  and  thus  appease  the  landlord  and  save  the  removal  of  the 


L 


the  instal- 
lall  amount 
s  far.jly,  or 
hese  causes 
only  unable 
ue,  but  also 
ini,  or  some 
5r  the  other 
of  which,  of 
or  less  jeop- 
s  not  neces- 
i  instalment 
;r  mutual, 
ant  that  the 
luse  the  cus- 
lon-payment 
;rable  loss  to 
of  this  kind, 
ty  to  resume 
d  passed  by. 
lakes  a  frank 
of  all  the  cir- 
ntag?  to  ad- 
use  in  paying 
gmoval  of  the 


ACCOUNTING  SYSTEM 


807 


goods.     The  question  then  arises,  how  should  such  a  transaction 
be  treated  in  the  books  of  the  business? 

Two  plans  suggest  themselves,  the  first  of  which  is  as  follows: 
A  special  account  may  be  opened  with  the  customer  in  that  por- 
tion of  the  ledger  designated  as  Sundry  Debtors,  which  account 
at  the  outset  would  be  debited  with  the  amount  advanced,  and 
credited  from  time  to  time  as  it  is  repaid.     This  plan  has  favor 
for  the  reason  that  the  transaction  evidenced  by  it  is  entirely  out- 
side of  the  lease  agreement  or  chattel  mortgage,  and,  being  a 
special  matter,  ought  to  have  its  own  separate  account.     Certain- 
ly it  is  not  expedient  to  class  the  amount  that  is  so  advanced  with 
the  merchandise  purchases  of  the  customer.     The  effect  of  the 
transaction,  however  managed  in  the  bookkeeping,  is  to  divert 
payments  for  the  time  being,  which  otherwise  would  apply  to  the 
merchandise  account,  to  the  discharge  of  the  loan.     The  stipula- 
tion with  the  customer  should  be,  of  course,  that  when  his  pay- 
ments are  resumed,  they  shall  first  be  applied  to  retiring  the  loan, 
and  whenever  it  has  been  paid  off,  they  'hall  then  continue  to  ap- 
ply to  the  ourchaLCs.     The  merchant  may  or  may  not  have  spe- 
cial security  for  the  loan  thus  made  to  the  customer.     However 
that  may  be,  the  plan  of  bookkeeping  here  suggested  leaves  the 
merchandise  or  instalment  account  with  the  customer  stationary 
in  amount,  until  such  time  as  the  loan  has  been  repaid.     This 
plan,  therefore,  is  deemed  the  best  for  use  in  view  of  all  the  circum- 
stances. 

The  only  possible  objection  to  the  foregoing  plan  is  one  that 
is  sometimes  raised  by  business  men  and  bookkeepers,  and  which 
is  based  upon  theoretical  consideration  rather  than  upon  prac- 
tical conditions.  It  is  that  thereby  two  accounts  would  exist 
with  the  same  customer.  For  the  sake  of  consistency  in  this  mat- 
ter they  would  prefer  to  have  the  amount  of  the  loan  posted  di- 
rectly to  the  account  of  the  customer  in  the  Instalment  Ledger,  so 


-t3 


•'..■ .  •miKj'i'f'  -.••■fisi  't»  ' 


806 


THE  SELF-PROVING 


S 


that  his  whole  indebtedness  would  appear  in  one  place.  This  al- 
ternative plan  is  feasible,  if  it  is  preferred,  but,  of  course,  such  spe- 
cial entries  in  the  debit  of  the  Instalment  Ledger  would  have  to  he 
taken  into  consideration  when  proving  the  Ledger  with  the  Sales 

Record. 

If  both  cash  and  merchandise  items  are  charged  to  the  ac- 
count in  the  Instalment  Ledger,  then  the  footings  of  the  Instal- 
ment Ledger  must  be  separated  into  two  amounts  in  order  to 
properly  compare  with  the  Sales  Record.     There  is  the  further  ob- 
jection to  this  plan  that  it  would  serve  to  confuse  matters  if  m 
case  of  a  dispute  at  some  later  date  the  customer  set  up  the  claim 
that  the  amounts  paid  after  the  date  of  the  loan  should  have  ap- 
plied on  the  goods  instead  of  being  in  repayment  of  the  money 
borrowed.     Upon  this  contention  it  might  in  extreme  cases  be 
shown  that  the  goods  at  a  certain  date  had  been  entirely  paid  for, 
and  the  terms  of  the  lease  or  mortgage  complied  with,  while  as  a 
fact  the  customer  was  still  indebted  to  the  merchant  for  the 
amount  of  the  loan,  for  which,  under  these  circumstances,  he 
would  have  no  security  whatsoever.     By  opening  separate  ac- 
counts, as  first  proposed,  and  allowing  each  of  two  distinct  trans- 
actions to  stand  upon  its  own  footing,  the  chances  of  disputes  and 
difficulties  of  this  kind  are  entirely  removed. 

When  a  special  account  for  money  advanced,  or  for  any  other 
item,  is  opened  in  the  part  of  the  ledger  called  Sundry  Debtors, 
cross  reference  should  be  made  between  the  two  accounts.  This 
may  be  satisfactorily  accomplished  by  a  pencilled  entry  made  near 
the  name  in  each  account,  recording  the  volume  and  page  where 
the  other  account  is  to  be  found.  By  this  plan,  whenever  one 
account  is  examined  attention  is  instantly  called  to  the  other. 


This  al- 
,  such  spe- 
have  to  he 

I  the  Sales 

to  the  ac- 
the  Instal- 

II  order  to 
further  ob- 
atters  if  in 
3  the  claim 
id  have  ap- 
the  money 
le  cases  be 
ly  paid  for, 
,  while  as  a 
mt  for  the 
stances,  he 
eparate  ac- 
tinct  trans- 
iisputes  and 

)r  any  other 
ry  Debtors, 
unts.  This 
\r  made  near 
page  where 
lienever  one 
le  other. 


1 1 


CARTAGE    AND    STORAGE 

Requests  for  Cartage  and  Storage  in  an  instalment  business 
are  of  almost  daily  occurrence.     Transactions  of  this  kind  are 
frequent,  because,  in  many  cases,  it  is  necessary  for  the  merchant 
to  resort  to  storage  practice  in  order  to  have  in  his  possession 
goods  which  the  customer  has  not  fully  paid  for.     For  example, 
the  purchaser  may  desire  to  discontinue  housekeeping  for  a  time, 
in  which  case  some  provision  must  be  made  for  the  care  of  his 
furniture  and  effects.     It  is  much  better  for  the  instalment  mer- 
chant to  be  the  custodian  of  the  goods,  under  the  circumstances, 
than  to  have  them  out  of  his  possession.     Again  cases  .arise 
wherein  the  purchaser  contemplates  moving  away  from  the  city, 
and  inasmuch  as  the  lease,  chattel  mortgage  or  purchase  contract 
under  which  he  has  the  use  of  the  goods  will  not  permit  him  to 
ship  them,  he  is  obliged  to  look  for  storage  in  the  town  where  he 
has  been  living.     Under  all  such  conditions  it  is  better  for  the 
instalment  dealer  to  be  the  storage  depository  than  to  have  any 
one  else  act  in  that  capacity.     For  these  reasons  and  others  it  is 
frequently  to  the  advantage  of  the  merchant  to  offer  the  use  of 
his  facilities  to  his  customers,  and  to  tender  them  the  use  of  his 
warehouse  as  a  storage  place  upon  very  reasonable  terms. 

Similar  conditions  prevail  in  the  matter  of  cartage.  It  is  to 
the  merchant's  interest  to  send  his  own  wagons  or  trucks  for 
goods  that  are  to  be  stored,  and  in  many  cases  to  have  them  used 
in  ordinary  removals.  Tendering  the  use  of  his  teams  and  work- 
men for  all  such  purposes  frequently  puts  him  in  a  position  to 
know  through  the  reports  of  his  employes  just  what  is  going  on  in 
directions  that  concern  his  interests. 


310 


THE  SELt-PROVlXa 


Where  cartage  or  storage  is  supplied  in  this  way  it  is,  of 
course,  something  to  be  charged  for.  Accordingly,  the  cartage 
and  storage  service  of  an  instalment  business,  properly  conducted, 
very  frequently  results  in  a  revenue  of  some  considerable  size,  if 
not  an  actual  profit.  The  manae:ement  of  the  charges  in  the 
books  is  the  special  point  to  be  considered  at  this  time.  Where 
the  cartage  and  storage  is  comparatively  insignificant  in  amount 
it  is  recommended  that  the  income  be  treated  as  a  credit  to  tl.j 
proper  expense  account.  It  is  to  be  regarded  as  an  offset  to  •  ;  a 
diminution  of  an  expense  rather  than  an  earning  or  a  rever.je. 
Even  where  the  items  of  cartage  and  storage  amount  to  a  consid- 
erable sum,  this  plan  will  be  advantageous,  and  it  may  be  satis- 
factorily  pursued  until  the  cartage  and  storage  transactions  reach 
the  magnitude  of  a  separate  undertaking,  or  a  well  defined  depart- 
ment of  the  general  enterprise.  In  the  latter  case  Cartage  and 
Storage  Account  should  be  given  the  same  rank  as  a  merchandise 
account. 

Cartage  and  storage  always  should  be  cash  transactions. 
Accordingly,  in  a  business  of  ordinrry  dimensions,  there  is  no  need 
of  bookkeeping  in  this  account  save  only  to  take  cognizance  of 
the  cash  when  it  actually  comes  to  hand.  The  items  of  charge 
may  be  safely  kept  on  a  Customer's  Storage  Memorandum,  with 
a  cross  reference  on  the  customer's  pay  card.  It  is  always  neces- 
sary, of  course,  to  know  th  j  amount  of  the  charge  for  storage  at 
the  time  of  a  settlement,  but  in  most  cases  it  is  neither  necessary 
nor  expedient  to  go  to  the  trouble  of  opening  an  account  with  the 
customer  for  this  service,  for  the  special  reason  that  such  charges, 
except  only  in  a  warehouse  business  formally  organized  and  con- 
ducted, seldom  prove  a  valuable  asset  to  the  concern.  Instead, 
the  nature  of  the  items  is  more  like  that  of  costs  in  legal. proceed- 
ings— something  to  be  adjusted  and  paid  before  the  claims  are 
released  or  the  goods  restored  to  their  normal  position. 


y  it  is,  of 
le  cartage 
:onducted, 
ble  size,  if 
ges  in  the 
e.     Where 
in  amount 
edit  to  t!ii 
f  set  to  •  .-a 
a  rever.ae. 
:o  a  consid- 
ay  be  satis- 
:tions  reach 
med  depart- 
l^artage  and 
merchandise 

iransactions. 
re  is  no  need 
Dgnizance  of 
ns  of  charge 
andum,  with 
dways  neces- 
or  storage  at 
her  necessary 
ount  with  the 
such  charges, 
ized  and  con- 
ern.     Instead, 
legal  proceed- 
the  claims  are 
ition. 


1 


RECOVERING    GOODS 

Under  lease  or  contract  sales  the  merchant  has  the  right  to 
demand  the  restoration  of  the  goods  whenever  the  customer  is  in 
default  in  his  payments.  In  most  cases,  in  view  of  the  agreement 
which  was  signed  at  the  outset,  the  customer  is  willing  to  give  up 
the  goods  peaceably  and  without  objection.  It  is  greatly  to  the 
merchant's  interest  to  get  possession  of  the  goods  in  this  way 
where  possible  instead  of  resorting  to  legal  proceedings.  In  fact, 
it  is  best  to  defer  all  legal  proceedings  so  long  as  the  merchant  is 
not  actively  opposed  by  the  customer,  and  so  long  as  no  resistance 
is  offered  to  his  employes  by  way  of  preventing  them  from  taking 
the  goods,  when  it  is  his  right  to  seize  them. 

If  the  customer  locks  the  door  and  refuses  the  truckman  ad- 
mission, or  if  the  customer  sits  down  on  the  goods  and  refuses  to 
surrender  them,  it  is  expedient  to  avoid  using  force  and  to  with- 
draw from  the  efiort  preparatory  to  entering  upon  an  entirely  dif- 
ferent line  of  action.  A  special  reason  for  this  is  that  under  the 
law,  as  it  is  interpreted  in  many  places,  any  attempt  to  take  the 
goods  against  the  active  opposition  of  the  customer  would  render 
the  merchant  or  his  employe  liable  to  action  for  assault  and  tres- 
pass. The  merchant  does  not  want  to  be  made  the  defendant  in 
any  case.  Therefore  he  must  proceed  upon  such  a  plan  as  to  keep 
all  the  advantages  upon  his  side. 

The  most  satisfactory  way  to  recover  goods  from  a  delin- 
quent customer  when  he  refuses  to  yield  up  possession  in  a  peace- 
able way  is  by  replevin.     The  replevin  process  may  not  be  Uked 


ll 


812 


THE  SELF-PROVING 


because  it  involves  some  expense,  but  this  should  be  submitted  to, 
because  thereby  the  merchant  has  the  satisfaction  of  knowing  that 
he  is  strictly  within  the  law  in  all  that  he  is  doing,  and  that  he  is 
proceeding  in  a  way  to  protect  himself  against  any  proceedings 
for  damage  which  the  angered  customer  might  see  fit  to  institute. 
The  goods  having  been  sold  on  stated  conditions,  and  the  pay- 
ments being  in  default,  the  right  is  thereby  given  the  merchant  at 
his  discretion  to  protect  his  interests  by  recalling  the  goods. 
Where  he  can  get  them  without  legal  process  and  with  the  per- 
mission of  the  customer,  it  is  best  so  to  take  them,  but,  on  the 
other  hand,  where  there  is  any  opposition  replevin  is  the  best 
method  to  pursue. 


nitted  to, 
wing  that 
that  he  is 
jceedings 
institute. 

the  pay- 
Tchant  at 
le  goods. 
I  the  per- 
it,  on  the 

the  best 


1 


GOING    TO    LAW    WITH    DEBTORS 

There  are  several  points  which  should  be  carefully  considered 
by  the  merchant  before  deciding  upon  legal  proceedings  against 
the  debtor,  and  particularly  before  commencing  a  suit  to  recover 
an  amount  on  an  open  account  or  for  damages  done  to  goods.  If 
the  debtor  is  not  worth  something — that  is,  if  he  is  not  responsible 
and  in  possession  of  goods  or  property  sufficient  to  make  a  judg- 
ment good  in  case  it  is  obtained — it  is  only  a  waste  of  money  in 
lawyers'  fees  and  court  costs  to  sue.  It  is  worse  than  useless  to 
attempt  to  make  a  man  pay  who  has  nothing  in  sight  that  can  be 
reached  under  execution. 

Before  going  to  law  with  a  debtor  it  is  expedient  to  become 
acquainted  with  his  circumstances  in  fine  detail.  A  debtor  may  be 
apparently  living  very  comfortably,  and,  from  a  superficial  exami- 
nation, seem  to  be  in  a  position  to  pay,  or  at  least  to  have  property 
which  in  value  is  equal  to  the  judgment,  if  a  judgment  is  obtained. 
When  the  actual  facts  are  ascertained,  however,  it  may  be  shown 
that  all  the  property  that  is  in  sight  belongs  to  his  wife,  or  to  some- 
body else  other  than  himself,  and,  accordingly,  is  not  liable  to 
seizure.  Or  all  the  goods  in  sight  may  be  covered  by  a  chattel 
mortgage,  or  by  bill  of  sale,  or  by  some  other  conveyance  which 
would  secure  them  against  execution. 

Again,  judgment  summons  for  debt,  as  it  sometimes  occurs, 
is  quite  unsatisfactory,  for  it  is  very  difficult  to  get  a  man  to  give 
such  evidence  when  up  on  judgment  summons  as  will  cause  the 
Judge  to  instruct  him  to  pay  his  creditor  a  certain  amount  weekly 


314 


THE    8ELF-PR0VIVG 


or  monthly,  as  the  case  may  be.  Even  when  the  Judge  gives  in- 
structions of  this  kind,  and  the  debtor  fails  to  comply  therewith, 
and  the  merchant  again  brings  him  to  court  under  judgment  sum- 
mons, which,  of  course;  entails  additional  cost,  the  debtor  very 
generally  is  able  to  put  forth  what,  from  the  Judge's  point  of  view, 
is  a  very  reasonable  excuse,  with  the  result  that  he  is  released  from 
the  first  instructions  and  ordered  to  pay  his  creditor  a  smaller 
amount  monthly  or  weekly,  as  the  case  may  be. 

This  same  process  may  be  repeated  again  and  again,  only  to 
weary  the  merchant  and  to  pile  up  expense  in  the  way  of  attorney's 
fees  and  court  costs.  The  advice  to  the  merchant,  therefore,  is 
not  to  be  too  hasty  in  resorting  to  legal  proceedings.  At  the  out- 
set take  the  special  precaution  of  studying  the  character  of  the 
debtor  and  the  extent  of  his  property.  Do  not  divert  too  much 
time  from  the  management  of  your  regular  business  to  suits,  for 
often  what  is  lost  in  the  profits  of  the  business  that  might  be  done, 
added  to  the  expenses  of  legal  proceedings,  is  considerably  more 
than  the  debt  that  you  are  undertaking  to  collect. 


L 


ge  gives  in- 
^  therewith, 
gment  sum- 
debtor  very 
)int  of  view, 
:leased  from 
)r  a  smaller 

ain,  only  to 
)f  attorney's 
therefore,  is 
At  the  out- 
acter  of  the 
rt  too  much 
to  suits,  for 
jht  be  done, 
erably  more 


INTEREST    ON    OVERDUE    ACCOUNTS 

In  some  branches  of  the  instalment  business  a  considerable 
revenue  is  obtained  from  interest  on  overdue  accounts.  Where  in- 
terest charges  are  made  the  merchant  must  bear  in  mind  that  such 
charges  are  not  merchandise,  and  therefore  must  not  be  confused 
therewith.  It  would  be  fatal  to  the  classification  scheme  so  care- 
fully embodied  in  the  system  of  accounting  shown  in  this  book  to 
have  interest  charges  passed  to  the  credit  of  merchandise  sales. 
The  credits  for  the  amounts  charged  for  interest  must  go  to  Inter- 
est Account  and  show  from  time  to  time  in  that  account  separate 
and  distinct  from  the  other  representative  accounts.  Interest  and 
merchandise  must  be  kept  distinct  from  each  other,  thereby  en- 
abling the  merchant,  by  reference  to  the  accounts,  to  know  how 
much  is  derived  from  each  different  source  of  revenue. 

In  the  Self-Proving  Instalment  Ledger,  as  elsewhere  ex- 
plained, it  is  provided  that  interest  charges  and  charges  for  goods 
shall  be  posted  to  the  same  column.  Nevertheless,  the  credits  go 
to  different  accounts,  and  in  proving  the  ledger  the  footings  of 
these  different  accounts  are  taken  collectively. 

Where  charges  for  interest  are  considerable  in  number  and 
are  regularly  made  it  is  advised  that  a  regular  Interest  Record  be 
maintained  in  which  interest  charges  from  time  to  time  shall  be 
entered,  the  same  as  sales  are  entered.  This  work  should  be  done 
periodically  and  systematically  in  order  that  the  charges  spread 
through  the  books  shall  always  be  in  proper  order.  If  a  charge  for 
interest  is  a  regular  rule  on  certain  accounts,  then  those  accounts 


I  . 


li 


816 


THE  SELF-PROVINO 


should  be  properly  designated  and  the  charges  for  interest  should 
be  made  to  thtni  through  the  interest  Record  at  the  close  of  each 
month.  In  this  way  the  business  in  this  regaru  will  always  be  kept 
up  to  date. 

It  sometimes  happens  that  interest  is  charged  in  an  account 
and  that  in  the  final  settlement  a  compromise  in  the  amount  is 
made.  The  account  is  settled  for  a  less  sum  than  the  aggregate  of 
what  has  been  charged  to  it.  Entries  for  concessions  of  this  kind 
are  to  be  made  in  the  same  manner  as  described  elsewhere  in  this 
volume,  under  the  head  of  Allowances.  It  should  always  be  borne 
in  mind,  however,  that  only  that  account  should  be  debited  for  an 
allowance  or  deduction  which  has  had  the  credit  for  the  amount  in 
the  first  place.  It  should  ever  be  kept  before  the  bookkeeper  that 
the  one  object  in  accounting  is  to  show  by  the  balance  in  any  rep- 
res(  tative  account  the  net  results  of  that  account.  Hence,  if  In- 
terest has  been  credited  in  making  up  the  amount  in  any  cus- 
tomer's account,  and  there  is  finally  a  deduction  or  an  allowance 
made  in  settling  that  account,  amounting  in  fact  to  an  abatement 
of  part  or  all  of  the  interest,  then  Interest  Account  is  to  be  deb- 
ited. The  columns  in  the  Cash  Journal  provide  for  all  necessary 
cross  entries  of  this  kind  whenever  it  is  found  difficult  to  make 
them  elsewhere. 


L 


ll 


rest  should 
ose  of  each 
lys  be  kept 

an  account 
amount  is 
jgregate  of 
3f  this  kind 
tiere  in  this 
ys  be  borne 
jited  for  an 
:  amount  in 
keeper  that 
in  any  rep- 
^ence,  if  In- 
n  any  cus- 

I  allowance 
abatement 
to  be  deb- 

II  necessary 
lit  to  make 


VOUCHERS  FOR  DISBURSEMENTS. 

It  is  scarcely  necessary  to  use  any  argument  with  the  experi- 
enced business  man  to  support  the  as  -rtion  that  vouchers  for  dis- 
bursements should  be  obtained  in  all  c<  ses  an<!  properly  filed.  His 
interests  in  every  instance  are  served  by  laying  down  the  broad  and 
invariable  rule  that  the  cashier,  bookkeeper,  or  whoever  has 
charge  of  disbursements,  must  have  a  signed  voucher  for  every 
cent  that  is  paid  out.  The  form  of  the  voucher  itself  is  of  less  im- 
portance than  the  fact  that  a  voucher  is  always  obtained  and  pre- 
served. Bookkeeper^  and  cashiers,  as  a  rule,  readily  acquiesce  in 
this  plan  hen  it  is  once  installed  because  it  results  in  a  protection 
to  them  in  all  cases  of  disputed  accounts  and  in  general  causes  the 
business  to  proceed  with  less  friction  than  where  such  a  rule  is  not 

enforced. 

Vouchers  should  be  regularly  and  systematically  filed.  They 
should  bear  a  serial  nUmber  and  for  convenience  in  reference  this 
number  should  be  recorded  on  the  cash  book  and  in  every  other 
place  where  the  transaction  is  referred  to  in  a  way  to  enable  all  the 
documents  in  a  case  to  be  instantly  available  whenever,  for  any  rea- 
son whatsoever,  the  history  of  an  account  is  to  be  investigated. 

Some  voucher  forms  which  i"  practice  have  been  found  very 
advantageous  to  employ  are  shown  herewith.  Particular  atten- 
tion is  directed  to  the  list  of  accounts  that  is  printed  on  the  face  of 
the  voucher  and  against  one  of  which  a  check  mark  or  initial  is  to 
be  placed  by  the  manager  or  other  directing  man  to  show  where 
the  amount  is  to  be  charged.  In  every  business  enterprise  a  num- 
ber of  expense  accounts  are  conducted,  some  of  which  have  names 


ill 


uwn»iiW-Ji>  »■ 


m 


THE   SELF-1'BOVINO 


that  do  not  always  remain  in  mind  in  a  way  to  be  instantly  avail- 
able and  correctly  written  on  the  voucher  when  checkm-  tt.  o 
save  confusion  or  uncertainty  when  one  of  the  accounts  ...  to  be 
desi^Muited  the  list  iu  full  is  printed  on  each  voucher.    Havnig  a 


A  CONVENIENT  FORM  OF  VOUCHER. 

list  Of  the  accounts  before  him  at  the  time  an  amount  is  approved, 
the  work  of  the  managing  man  in  designating  the  direction  of  the 
charge  is  reduced  to  a  minimum.  All  the  uncertainty  growmg  out 
of  a  faulty  memory  as  to  the  correct  name  of  the  account  is 
avoided. 


■'f  ^ 


AMOUNT 


t  is  approved, 
rection  of  the 
r  growing  out 
le  account  is 


y-^f^siyi^g^^KS^Sr^ 


.  ^,^-m,^-iiu.iJnti,mmv-  .yi.i;'.'i-*Min-Ji 


ri'sm^nf'PTrr'0'^SaSS'' 


^> 


IMAGE  EVALUATION 
TEST  TARGET  (MT-3) 


L. 


Sciences 
Corporation 


23  WEST  MAIN  STREET 

WEBSTER,  N.Y.  14580 

(716)  872-4503 


CIHM/ICMH 

Microfiche 

Series. 


CIHM/ICIVIH 
Collection  de 
microfiches. 


Canadian  Institute  for  Historical  Microreproductions  /  Institut  Canadian  de  microreproductions  historiques 


^ 


DATING    STAMPS 

Every  office,  sales  department,  receiving  department,  and 
shipping  department  as  well,  should  be  provided  with  dating 
stamps.  Band  daters,  neat  in  general  appearance  and  efficient  in 
work,  are  of  the  greatest  convenience,  and  are  at  the  present  time 
obtainable  at  so  small  a  price  that  it  is  poor  economy  to  be  without 
them.  Giving  each  clerk  who  has  anything  to  do  with  the  records 
one  of  these  daters,  and  demanding  that  every  paper  that  he  han- 
dles shall  bear  a  date,  will  be  found  to  work  greatly  to  the  advan- 
tage of  the  business  and  to  be  conducive  to  thorough  system. 

Every  letter  received  in  the  office,  as  well  also  as  every  invoice 
and  memorandum,  of  whatsoever  nature,  should  be  stamped  with 
the  date  at  which  it  comes  to  hand.  In  turn,  every  shipment,  and 
every  receipt  of  goods,  and  every  delivery,  of  any  kind  whatsoever, 
should  be  similarly  dated.  If  a  stenographer  is  employed  the  note- 
book in  which  dictations  are  recorded  should  be  likewise  dated 
from  day  to  day. 

In  many  cases  it  is  expedient,  so  far  as  the  immediate  work  of 
the  office  is  concerned,  to  go  a  step  further  and  employ  an  auto- 
matic time  stamp,  which,  in  addition  to  the  day,  month  and  year, 
will  also  print  the  hour  ?.nd  minute.  Devices  of  this  kind,  although 
somewhat  expensive  in  first  cost,  are  really  economical  in  view  of 
the  great  advantages  that  follow  upon  their  use. 


BAD    BUYING 

Some  of  the  losses  incident  to  any  form  of  the  merchandising 
business  are  due  to  indiscreet  buying  or  to  mistakes  of  judgment 
in  ordering,  and  the  consequent  accumulation  of  what  is  very  gen- 
erally called  bad  stock.  Bad  stock,  however,  can  be  handled  in 
the  instalment  business  to  better  advantage,  so  far  as  profit  is  con- 
cerned, than  in  a  business  conducted  upon  any  other  plan.  In 
most  branches  of  the  retail  trade  there  is  a  further  loss  on  stock 
while  on  the  warehouse  floor  through  wear  or  damage.  All  this 
adds  to  the  accumulation  of  goods  which  are  not  really  good 

sellers. 

To  get  rid  of  stock  of  this  kind  it  is  necessary  to  offer  the 
articles  at  reduced  prices.  In  ordinary  retail  trade  the  offers 
necessarily  are  made  at  less  than  the  cost  prices;  hence  all  accumu- 
lations of  this  kind  in  an  ordinary  merchandising  business  repre- 
sent a  direct  loss.  The  goods,  as  a  rule,  cannot  be  sold  at  a  price 
that  covers  even  a  small  profit,  for  cash  buyers  are  always  looking 
for  the  very  best  that  they  can  get  for  their  money,  and  compe- 
tition in  such  instances  very  frequently  causes  offers  at  figures  be- 
low cost. 

In  the  instalment  business,  however,  with  its  broader  mar- 
gins, damaged  goods  and  undesirable  articles  can  always  be  worked 
off  at  figures  somewhat  above  cost,  for  there  is  always  a  class  of 
customers  willing  to  take  articles  of  this  sort,  provided  the  price 
quoted  is  made  a  little  less  than  that  of  standard  goods  or  perfect 
articles  of  the  same  kind.  Hence  it  is  that  the  instalment  mer- 
chant has  the  advantage  over  the  retail  merchant  operating  upon 
some  other  plan  in  disposing  of  bad  stock.  He  does  not  need  to 
cut  the  prices  on  bad  stock  to  a  figure  below  cost. 


merchandising 
s  of  judgment 
at  is  very  gen- 
be  handled  in 
s  profit  is  con- 
ther  plan.  In 
•  loss  on  stock 
lage.  All  this 
)t  really  good 

ry  to  oflfer  the 
ade  the  offers 
ice  all  accumu- 
business  repre- 
sold  at  a  price 
always  looking 
;y,  and  compe- 
s  at  figures  be- 

s  broader  mar- 
ways  be  worked 
[ways  a  class  of 
vided  the  price 
;oods  or  perfect 
nstalment  mer- 
operating  upon 
oes  not  need  to 


EXAMINATION    OF    RECORDS    OF    CHATTEL 

MORTGAGES 

It  is  to  the  advantage  of  merchants  employing  the  credit 
svstem  to  inaugurate  a  plan  of  regularly  examining  the  records 
of  the  chattel  mortgages  which  are  filed  from  time  to  time  m  the 
registry  office  of  their  town  or  county,  as  the  case  may  be.  It  is 
essential  in  their  interest  that  they  know  what  is  being  done  m 
matters  of  this  kind,  for  occasionally  it  happens  that  goods  upon 
which  they  have  a  lease  are  included  in  chattel  mortgages  given 

by  their  customers. 

Various  plans  by  which  they  can  watch  the  records  in  this 
re-ard  suggest  themselves.  In  some  districts  there  are  local 
agaicies  which  undertake  for  a  very  reasonable  consideration  to 
report  from  day  to  day  everything  of  this  kind  that  is  put  upon 
record  In  certain  districts  also  a  regular  publication  is  made  of 
all  the  chattel  mortgages  filed;  and  in  other  cases  the  merchant 
finds  it  advantageous  to  detail  a  clerk  to  visit  the  registry  oftice 
regulariy  for  the  purpose  of  obtaining  this  information. 

Merchants  who  are  in  receipt  of  timely  information  of  this 
kind  concerning  matters  affecting  their  interests  have  ample 
remedies  in  hand,  because,  of  course,  they  can  claim  the  goods, 
the  title  to  which  is  theirs,  or  goods  upon  which  they  have  a  prior 
claim  upon  any  basis,  whenever  and  wherever  they  find  them.  In 
order  to  protect  their  interests,  it  is  necessary  for  merchants  who 
are  proceeding  upon  the  plan  of  lien  or  contract  sales  to  be  con- 
stantly alert  in  matters  of  this  kind;  hence  the  advisability  of  some 
plan  of  regularly  and  systematically  watching  the  records  of  chat- 
tel mortgages. 


[  . 
I   -'I 


'I 


DETECTIVE    WORK 

In  a  business  spread  over  as  much  territory  and  transacted 
with  as  many  individuals  as  is  usually  the  case  with  instalment 
bouses,  a  certain  amount  of  detective  work  is  a  necessity  m 
order  to  avoid  excessive  losses.     There  are  some  people  m  the 
world  who  are  kept  honest  by  the  very  fear  of  being  detected  in 
wrong  doing;  and  there  are  others  who  are  deterred  from  deviat- 
ing from  the  path  of  rectitude  by  the  lack  of  opportumty  to  do 
wrong,  or  the  knowledge  that  they  are  being  more  or  less  watched. 
The  advantages,  therefore,  to  the  instalment  house  of  a  detective 
branch,  or  the  employment  of  men  specially  skilled  in  detective 
work  is  not  to  be  measured  alone  by  that  which  is  shown  to  be 
the  direct  results  of  their  effort,  but  is  also  tobe  estimated  m  the 
light  of  the  moral'influence  which  the  knowledge  of  such  facihties 
exerts  over  trade  at  large.     Credit  dealers,  as  a  rule,  are  loath  to 
resort  to  detective  methods  until  they  have  been  more  or  less  im- 
posed upon  by  those  who  are  dishonest.     Then,  recognizing  the 
frailties  of  human  nature,  they  resort  to  the  only  method  that  is 
left  them  in  order  to  protect  their  interests  so  far  as  possible. 

There  are  various  ways  in  which  detectives  may  be  advan- 
tageously employed  in  the  instalment  business.  Just  what  plan 
to  pursue  is  to  be  determined  largely  by  the  nature  of  the  business 
conducted,  the  location  of  the  trade,  whether  in  a  large  city  or  in 
a  suburban  town,  and  also  by  the  character  of  the  individua  cus- 
tomers The  detective  may  be  a  bright  clerk  of  the  establish- 
ment, who  has  quahfications  in  this  direction,  or  he  may  be  some 


id  transacted 

th  instalment 

necessity  in 

people  in  the 

g  detected  in 

1  from  deviat- 

>rtunity  to  do 

•  less  watched. 

of  a  detective 

d  in  detective 

5  shown  to  be 

timated  in  the 

i  such  facilities 

e,  are  loath  to 

ore  or  less  im- 

jcognizing  the 

nethod  that  is 

s  possible. 

nay  be  advan- 

[ust  what  plan 

of  the  business 

large  city  or  in 

individual  cus- 

the  establish- 

e  may  be  some 


ACCOfNTING   SYSTEM 


:)28 


one  who  is  specially  employed  for  the  purpose,  this  latter  plan 
having  the  advantage  of  putting  into  the  work  a  person  with 
whom  the  delinquent  customer  is  not  ac(|uainte(l,  or  one  whom 
he  would  not  recognize  on  sight.  In  extreme  cases  a  public  de- 
tective agency  may  be  advantageously  employed. 

More  or  less  of  the  qualities  of  detectives  are  re(|uired  by  suc- 
cessful collectors.  They  are  the  representatives  of  the  establish- 
ment who  come  in  daily  contact  with  the  customers,  and  they  are 
the  first  to  have  their  suspicions  aroused  that  all  is  not  straight  in 
certain  directions.  A  little  detective  ability,  therefore,  upon  the 
part  of  the  collector  is  a  qualification  of  no  small  importance  and 
is  very  generally  appreciated  by  the  merchant.  Judicious  incjuir- 
ies  of  neighbors,  of  the  grocer  and  of  the  butcher  as  to  the  stand- 
ing and  business  history  of  the  customer  will  very  frequently  put 
the  collector  on  the  track  of  more  direct  information,  to  be  ob- 
tained through  channels  which  will  suggest  themselves  to  liim, 
which  is  of  the  utmost  importance  to  the  concern. 

In  some  of  the  large  cities  there  are  people  wlio  make  it  a 
business  to  impose  upon  instalment  or  credit  houses,  and  where  a 
business  is  conducted  in  a  way  to  attract  the  attention  of  these 
people,  detectives,  tracers,  or  trackers  of  furniture,  as  they  are 
sometimes  called,  are  a  necessity.  They  are  men  who  give  their 
whole  time  to  looking  for  people  who  have  disappeared  with  fur- 
niture or  other  articles  bought  on  time  and  which  have  not  been 
settled  for.  One  of  the  necessary  qualifications  of  the  successful 
tracer  is  that  he  shall  be  a  jolly,  whole-souled  fellow,  and  one  that 
the  people  of  whom  he  seeks  to  obtain  information  will  not  in  the 
least  suspect  as  being  a  detective.  A  moody,  overbearing  and 
testy  sort  of  man  is  seldom  successful  in  this  capacity. 

A  large  concern  in  New  York  employs  a  number  of  men  in 
this  capacity,  and  a  brief  account  of  the  work  which  they  do  will 
give  the  reader  a  proper  conception  of  the  usefulness  of  such  a 


-■! 


gjj^  THE  SELF-PUOVlNa 

department  under  the  conditions  controlling  his  business.  In 
the  establishment  referred  to  it  is  the  rule  that  every  person  who 
comes  to  buy  furn.ture  shall  hirnish  references.  Further,  the 
house  insists  upon  knowing  that  the  customer  is  regularly  em- 
ployed in  some  legitimate  business.  Nevertheless,  factitious  ref- 
erences and  collusion  in  various  directions  sometimes  deceive  the 
sellers  in  a  way  to  put  them  to  the  necessity  of  tracing  the  goods 
which  have  left  their  store. 

People  who  make  a  business  of  defrauding  furniture  houses 
go  at  the  work  somewhat  systematically.     Women  are  detailed 
to  make  the  bargains,  while  the  men  take  charge  of  the  stuf=f  as 
soon  as  it  leaves  the  store  and  manage  the  disposition  of  it.  Some- 
times the  gang  of  operators  includes  auctioneers  who  operate  in 
collusion  with  them,  and  sales  before  seven  o'clock  in  the  morning, 
although  illegal,  are  not  unusual.     From  this  it  will  be  seen  that 
the  crooks  are  as  much  in  the  furniture  business  as  the  merchants. 
One  sign  by  which  the  operations  of  people  of  this  kind  may  be 
detected  is  the  reckless  way  in  which  they  buy.     Nothing  is  too 
good  for  the  purpose,  and  prices  are  no  object. 

The  house  above  referred  to  depends  upon  indications  of  this 
kind  for  evidence  that  the  purchase  either  is  in  good  faith  or  the 
opposite.  If  very  little  attention  is  paid  to  prices  and  there  is  a 
disregard  of  conditions  in  taking  the  goods,  suspicions  are  aroused^ 
On  the  other  hand,  if  careful  attention  is  given  to  the  selection  and 
there  is  evident  care  for  the  amount  of  the  bill  and  due  reference 
to  the  payments  that  are  to  be  made,  the  indications  are  that  the 
purchase  is  genuine  and  that  the  customer  intends  to  do  right. 

After  the  goods  are  out  of  the  store  and  some  irregularity  in 
the  account  occurs  that  convinces  the  management  that  some- 
thing is  wrong,  the  tracers  or  detectives  are  called  in  .for  such 
assistance  as  they  can  render.  Experience  has  shown  that  there 
are  three  classes  of  accounts  to  be  investigated  under  conditions 


'1 


ACCOUNTINQ   SYSTEM 


3^5 


isiness.  In 
person  who 
"urtlier,  the 
gularly  em- 
ictitious  ref- 
,  deceive  the 
ig  the  goods 

liture  houses 

are  detailed 

i  the  stuff  as 

1  of  it.  Souie- 

K)  operate  in 

the  morning, 

1  be  seen  that 

he  merchants. 

kind  may  be 

lothing  is  too 

cations  of  this 
)d  faith  or  the 

and  there  is  a 
ns  are  aroused, 
e  selection  and 
1  due  reference 
ns  are  that  the 

to  do  right. 
;  irregularity  in 
ent  that  some- 
led  in  for  such 
lown  that  there 
nder  conditions 


of  this  character.  The  first  and  most  important  includes  the  ac- 
counts of  the  crook  class,  to  which  reference  has  already  been 
made.  Next  there  are  the  accounts  of  the  really  honest  but  ap- 
parently dishonest  customers,  who  move  and  fail  to  report  their 
change  of  address.  And  last  there  are  the  accounts  of  a  class  of 
people  who  buy  furniture  and  walk  off.  leaving  it  behind  them. 

In  the  instalment  house  to  which  we  have  referred,  it  is  the 
rule  to  divide  the  city  into  several  districts  and  to  have  a  tracer  for 
each  district  so  that  he  may  become  familiar  with  his  own  par- 
ticular territory.  If  a  customer  moves  from  one  district  to  an- 
other, the  records  are  transferred  from  one  tracer  to  another,  and 
the  work  continues.  It  is  not  the  rule  to  dog  customers  about 
their  payments  in  a  way  to  get  them  out  of  patience,  but.  never- 
theless, they  are  quietly  watched  so  that  it  is  impossible  for  them 

to  get  away. 

Summed  up,  it  is  the  experience  of  this  establishment  and 
others  that,  as  a  fact,  very  few  people  who  buy  furniture  on  the  in- 
stalment plan  are  intentionally  dishonest.  They  are  more  fre- 
quently ignorant,  and  this  ignorance  leads  them  into  methods 
which  are  in  appearance  iriegular,  if  not  dishonest.  When  the 
matter  is  traced  down  and  all  the  facts  discovered,  the  element 
of  actual  dishonesty  is  found  in  almost  all  cases  to  be  lacking,  and 
proper  treatment  upon  the  part  of  th  bouse  represented  by  the^ 
*  tracer  or  detective  soon  brings  the  cv  tomer  into  good  habits* 
again,  and  finally  the  account  is  closed  in  a  satisfactory  manner. 

The  work  of  a  tracer  is  by  no  means  confined  to  the  city  in 
which  the  goods  are  sold.  For  instance,  in  the  case  of  the  New 
York  house  referred  to,  they  sometimes  find  their  furniture  down 
on  Staten  Island,  and  is  known  to  be  well  scattered  through  New 
Jersey,  and  other  lots  are  out  in  the  towns  of  Long  Island,  to  say 
nothing  of  the  quantities  that  are  in  the  annexed  district  and 
north  of  the  city.     Not  long  since  a  tracer  of  the  house  found  a 


I 


THE  SELF-PHOVINfl 
32« 

,„.  „,  ,„oas,  on  w.ic„  a  ......  paynjent  „..  .,ce,,  .na-.e >.  .  e 

,™«h.  depo.  of  .he  Pe„nsy.va,„u  la  roa.  J  J  ^,_^  ^^. 

PhJiarlelnhia      This  shipment,  howevei ,  did  not  gei  i^^> 
Fnnaaeipnia.        ii'^       i     ,  liiiJiiriplnhia  was  on 

„.,i,l  nht-iin  it      Furniture  lielonRnig  to  tnis  con 
tlic  consignee  could  obtatn  .t.  ^^_^|^^^_^ 

oern  has  also  gone  as  tar  as  some  of  the  cities 

S."  es    nd  the  customers,  on  being  followed  up,  have  paid  in  fu  h 

.t:':sta„ces  are  on  record  where  goods  '»-    -  « 
across  the  ocean,  which  transactions  are  referred  o  only  as  show 

r:.„at  the  credit  merchant  is  obliged  to  guard  against. 

-me  crooks,  of  course,  are  the  hardest  lot  to  deal  with.   They 

are  cl^stlntly  up  to  new  tricUs.  and  "H-''--  --— 
that  he  has  learned  everything  that  can  be  done  in  a  *  hones^ 
way  some  new  game  is  started.    A  very  common  plan  in  New 
vXk  Ported  to  by  people  of  this  class,  is  ^0^^^!^ 
and,  arranging  for  proper  references,  secure  a  -«^  "' ;^^. 

instalment  dealer  and  -^-e ''  ~  ;^   ^ZZ  .0  Keep  the 

r:r;:rnt,''::tr::;r;:e.:„dthens.ipo„twiththe 

•rn-r  ber:hem.  and  this  -  P-ace  .^^^^^^^^^^ 

:xr/o:r::r:r.:dor^^^^^^^^ 

-""  '-  ;;t\::=freyr r  rre:tusiness  fr„m  the 
:;Xin";:i:Tetective^or,urni.ure.™^^^ 

rr;r::;rrrort:rt:^^^^^^^^^^^^^ 

in  his  trade. 


rm-^1^ 


ade,  in  the 
unsigned  to 
jTond  the  re- 
phia  was  on 
liture  before 
to  this  con- 
ic Southern 
;  paid  in  full, 
icen  shipped 
inly  as  show- 
;ainst. 

[with.    They 
lant  supposes 
1  a  dishonest 
plan  in  New 
,  room  or  flat, 
stuff  from  the 
3rt  time  after- 
e  to  keep  the 
p  out  with  the 

in  this  way  and 
xy,  leaving  the 
ne  or  two  pay-* 
1  cases  there  is 
,ods  back,  for  it 
r  these  circum- 
siness  from  the 
serve  to  suggest 
trade,  .what  it  is 
itions  that  exist 


WRITING    OFF     BAD     DEBTS 

A  mistake  that  many  tnercliaiiis  make  is  that  of  allowing 
accounts  to  remain  in  their  ledgers  whkh.  to  their  certain  knowl- 
edge, are  uncollectable  and  worthless.  By  neglecting  to  write 
them  off  whenever  they  are  shown  to  be  bad,  they  keep  in  their 
assets  a  fictitious  amount,  and  thereby  frequently  deceive  them- 
selves into  believing  that  they  are  worth  more  money  than  they 
really  are.  It  is  expedient,  therefore,  on  the  score  of  good  busi- 
ness management,  to  take  out  from  among  the  live  accounts  of  a 
business  every  account  that  appears  to  be  bad  just  as  soon  as  its 
character  is  determined.  It  is  better  to  occasionally  remove  from 
the  books  of  the  business  by  this  plan  an  account  that  is  really 
collectable  than  to  allow  a  single  bad  account  to  remain. 

This  advice  is  by  no  means  to  be  construed  to  justify  a  mer- 
chant in  ceasing  to  follow  up  his  debtors  simply  because  an  ac- 
count has  become  bad  or  doubtful.  Instead  it  means  only  the 
removal  from  the  live  accounts  of  the  business  of  all  accounts 
which  are  doubtful,  leaving  in  the  regular  books  only  those  which 
are  in  healthy  motion  and  which  are  to  be  depended  upon. 

Many  merchants  are  deterred  from  taking  the  regular 
ledgers  those  accounts  which  are  bad  and  doubtful,  because  no 
adequate  means  is  provided  for  looking  after  them  after  they 
have  been  taken  away  from  among  the  live  accounts.  This,  how- 
ever, is  not  the  case  with  those  who  make  use  of  the  facilities  pro- 
vided in  the  Self-Proving  Accounting  System.  The  Self-Prov- 
ing Suspended  List,  which  is  elsewhere  described  and  illustrated 


H 


si 


.,.,„  THE  HELF-PH<)V1N«J 

in  this  volume,  exactly  meets  the  requirements.  I^a.l  and  doul.t- 
ful  accounts  recorded  in  it  can  l.e  just  as  successfully  scrutim/ed 
and  followc<l  up  as  thou^di  they  had  been  left  in  the  mam  ledger 
of  the  establishment. 

The  remarks  here  made  with  reference  to  accounts  in  general 
apply  as  well  specifically  to  Instalment  Accounts.  In  Sundry 
Credits  column  in  the  Instalment  Ledger  there  is  provision  for 
taking  out  all  bad  accounts.  The  Instalment  Ledger,  therefore, 
should  be  relieved  of  all  bad  accounts  as  fast  as  they  are  discov- 
ered and  the  Suspended  List,  in  turn,  should  be  arranged  to  re- 
ceive them,  and  thereafter  they  should  be  managed  through  the 
new  book. 


I  and  (loul)t- 

y  scrutinized 

main  ledger 

its  in  general 
In  Sundry 
provision  for 
er,  therefore, 
J  are  discov- 
ranged  to  re- 
1  through  the 


X 


\ 


.:5^»l:-!W.<!ig'-'t-"--'g-'' 


i^m^mmiffMf 


